How is Deal Activity Trending into 2024?
It’s widely expected that 2023 will weigh in as a relatively weak year for deal volume. Since peaking in Q4 2021, deal activity has gradually declined, taking a significant downturn over the course of 2023. We’re breaking down some of the key deal volume trends that have contributed to this slowdown – and may affect deal activity into 2024.
Q3 2023 Mezzanine Market Perspective
In Q2 2023 91 deals including mezzanine debt closed, a 20% decrease from the 113 mezzanine deals closed in Q1 2023. 1H mezzanine activity increased approximately 21% YoY from 168 deals in 2022, to 204 deals in 2023. Despite the increase in mezzanine deal activity, private equity deal volume for the same time period decreased 18% from 2,950 deals in 2022, to 2,412 deals in 2023. Out of the 91 mezzanine deals that closed in Q2 2023, 38 deals were buyouts, 27 were minority financings, and 26 were sponsor-backed add-ons. The most common industries in total M&A activity for the quarter were Technology, Industrials, Consumer, and Healthcare, respectively.
Source Talks ep. 45
Source Talks is a series where we discuss deal origination with PE and M&A pros, in collaboration with David M. Toll.
In this episode, we speak with David Prendergast of Enhanced Healthcare Partners about the firm’s dedication to specific healthcare verticals. Their thematic approach to investing has helped them find exciting new opportunities and led them to being a $1.5 billion healthcare focused private equity firm.
PE firms still see less than 20% of target market deal flow
SPS recently published the 2023 Deal Origination Benchmark Report, finding that PE firms had an average 17.8% Market Coverage – or the share of relevant closed deals logged in PE firms’ pipelines – during the 2023 period. This year’s average Market Coverage has fallen slightly from the 2022 edition of the report but remains consistent with recent years.
