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GF Data Report: Q2 Brings Record Low Deal Volume

Bob Dunn of GF Data reflects on Q2's challenging dealmaking environment

M&A deal volume suffered in the first quarter of the year, but the second quarter brought worse news, with middle-market, private equity-backed transactions down significantly. Bob Dunn, managing director of GF Data, an ACG company, shared his thoughts with the Middle Market Growth Conversations podcast, noting that the companies that did manage to sell did so at a pronounced discount.

To discover more of Bob Dunn’s Q2 analysis, listen to the full episode of the Middle Market Growth Conversations podcast above or subscribe in Apple Podcasts or Spotify.

The private equity-backed middle-market transactions GF Data tracks inked just 57 deals in the second quarter, compared to 78 in the first quarter, with average deal pricing plummeting for companies of all sizes. Even companies with above-average financial performance had a tough go of it: Deals with these companies usually constitute the majority of deal activity, making up 67% of transactions in 2022. In the first half of 2023, that percentage fell to 51%, and the premium paid for these high performers fell to 8%, a sharp drop from 44% in the first quarter.

“I think that tells you it’s a cautious environment,” Dunn says. “People aren’t necessarily taking the results across last year as gospel.”

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Watch: Bob Dunn on Which Sectors Are Thriving in the Downturn

The manufacturing and distribution sectors have fared poorly in the current environment, both seeing lower average purchase price multiples in 2023 compared to 2022. On the other hand, businesses with recurring revenue had a better showing, with purchase prices for health care and business services up slightly in 2023 compared to their average in 2022. Dunn believes this reflects buyers’ search for businesses that are likely to perform well in a recessionary environment.

While there’s little good news to report, Dunn predicts that the second quarter was the bottom, and future reports are likely to have a sunnier tone. “You know what they say, it’s always darkest before the dawn, and I feel like we’re at a pretty dark point right now,” he notes. “But I have the sense that it’s going to be an improving market for the rest of the year…I think by the fourth quarter you’re definitely going to see improved deal flow again.”


Words by Hilary Collins, ACG’s Associate Editor.


GF Data releases analysis of middle-market M&A transactions on a quarterly basis. Stay tuned for our coverage of GF Data’s Q2 2023 report.


GrowthTV and the Middle Market Growth Conversations podcast is produced by the Association for Corporate Growth. To hear more interviews with middle-market influencers, subscribe to the Middle Market Growth Conversations podcast on Apple PodcastsSpotify and Soundcloud.