New York, October 26, 2023 – SPS sponsored a webinar on Thursday, October 26th titled, How to Land More Great Deals in 2024, moderated by David Toll of Private Equity Career Week.
CEO of SPS Nadim Malik joined David Santoni of Hennepin Partners, Jay Hernandez of Raymond James, and Jay Jester of Plexus Capital for a 75-minute discussion. The expert speakers covered under-the-radar industry trends, the latest AI-based technology, building and sustaining winning relationships with deal intermediaries, market coverage and benchmarking metrics and much more.
Malik evaluated the state of deal activity in the market over the past few years. Deal activity declined by just under 15% last year and is on track for a 15-20% decline in 2023. The trend that began in 2021 of PE representing a larger share of overall M&A activity compared to strategic buyers has continued through 2022 and so far in 2023, with PE activity representing 53% of overall deal activity for the year.
The trend of the buy-and-build and roll-up strategies in private equity continues to increase, reaching 2.7 add-ons for every platform in YTD 2023, after coming in at 2.6 add-ons for every platform last year. While firms are still completing add-ons at a more accelerated pace than platform deals, according to SPS’ recent 2023 DOBR analysis, add-ons fell by 40% from the year ending June 2022 to June 2023.
Financial Services saw the greatest add-on activity relative to other deal types so far in 2023, while financings continue to remain an important investment strategy in the Technology sector. Add-ons comprise the largest share of all transaction types for most sectors, and are the key contributor behind PE activity representing a higher share vs. corporate buyers of overall M&A activity for the last 2.5 years.
Looking at PE pipeline data, the median number of deals PE firms sourced was 211 in Q3 2023, which is the same as the prior quarter and approximately 8% less than Q3 2022. It’s now been two years since deal flow peaked in Q3 2021.
SPS has recently published the 2023 Deal Origination Benchmark Report (DOBR), an annual industry standard comparing sponsors’ deal sourcing metrics against similar firms and the whole industry. The 2023 report was derived from 167 qualifying PE firms, broken out into 8 peer groups based on size and level of sector focus. This year’s edition found that most firms are still missing over 75% of the relevant deals they’d like to see.