New York, July 25, 2024 – SPS sponsored a webinar on Thursday, July 25th titled, How to Prepare for the Next Wave of Great Deals, moderated by David Toll of Private Equity Career Week.
To view a recording of the full webinar, click here. To download the presentation slides, click here.
CEO of SPS Nadim Malik, Ramsey W. Goodrich of Carter, Morse & Goodrich, Steve Hunter of TM Capital, and Ted Kramer of HKW led a 75-minute discussion touching on a variety of topics such as how top firms are using AI, a look at hot sub-sectors that are generating deal opportunities for PE firms and independent sponsors, an assessment of where pricing multiples and leverage multiples are, and more.
Analyzing total PE and M&A volume, deal activity declined by 16% from 2022 to. 2023. Despite the decline, deal activity came in at the third highest level ever seen since SPS began tracking the data. 1H 2024 deal volume is on pace with 2023 levels, with deals completed in the first half of this year at just under 50% of total volume for 2023. PE buyers have narrowly outpaced corporate buyers so far this year, completing 51% of deals, compared to 53% last year.
Examining the most active sectors for 1H 2024 compared to 1H 2023, Industrials has been the most active sector, and is up slightly compared to last year, followed by Technology, Business Services, and Consumer. Healthcare, Financial Services, Energy, and Media/Telecom, are all down for 1H 2024 compared to the same period last year. PE has the edge over Corporate buyers in all of the top five most active verticals, while the Financial Services, Energy, and Media and Telecom sectors still tend to have a higher share of strategic vs PE deals, though the Financial Services sector had slightly more PE deals than corporate deals in 1H 2024.
The trend of the buy-and-build and roll-up strategies in private equity continued to accelerate, reaching 2.7 add-ons for every platform in in 1H 2024, compared to 2.5 add-ons for every platform last year, and 1.4 add-ons per platform about a decade ago, almost doubling in that time.
Looking at PE activity only and breaking down the sectors by deal type, Industrials, Business Services, and Financial Services saw the greatest add-on activity relative to other deal types in 1H 2024, while financings continue to remain an important investment strategy in the Technology sector. The overall decline in Healthcare PE activity in the first half of 2024 was driven by a sharp decrease in add-ons YOY. Add-ons comprise the biggest share, if not the majority, 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 3 plus years.
Studying PE pipeline data, the median number of deals PE firms logged was 238 in Q2 2024, up by over 18% from the prior quarter. Q2 2024 deal flow was up almost 10% compared to Q2 2023. The overall rise in deals seen by PE firms is very much in line with the steady rise in closed deal activity.
Malik shared a teaser of the new SPS Annual Sector Report, scheduled to be released next month. The report will consist of the latest deal activity trends per sector, providing a comprehensive snapshot of the industries, firms, and investment strategies driving private equity deal activity. The report dives deep into SPS’s sector taxonomy, which is derived from parent company Bain & Co. and is 500 subsectors rich, to further evaluate key sectors that have experienced significant growth or disruption over recent years, revealing key emerging opportunities.
