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DealMAX Preview: What’s Next for Strategics?

Ken Bond of Cetera Financial Group and Jim Lavelle of Houlihan Lokey discuss the current market for corporate acquirers and why you should consider attending the Strategic Acquirers Forum

DealMAX Preview: What’s Next for Strategics?

The Strategic Acquirers Forum at DealMAX is the place to go for insights on the landscape, valuable connections and discussions with your peers on the issues facing corporate dealmakers today. Ken Bond, head of corporate development for Cetera Financial Group, who will speak on the “State of Deal Terms in the Market” panel, and Jim Lavelle, managing director of Houlihan Lokey, who will speak on the “Making the Right Acquisition” panel, share their thoughts on what’s next for corporate acquirers and what attendees will walk away with. Bond and Lavelle were interviewed by Middle Market Growth separately.

Middle Market Growth: When do you think M&A will pick up?

Ken Bond: Has it fallen off? Cetera is expecting 2024 deal volume to increase over 2023.

Jim Lavelle: While it is true that global overall deal activity had been in steady decline since its peak in Q4 2021, the story is a bit more complicated. Full-year 2023 experienced the third highest M&A transaction count in history when looking at all transactions consummated. That said, there is a very clear falloff from 2021 and 2022 levels, so the market feels meaningfully less active.

While it is true that global overall deal activity had been in steady decline since its peak in Q4 2021, the story is a bit more complicated.

Jim Lavelle

Houlihan Lokey

Furthermore, the widespread financing tightness has made the process of financing and closing a deal that much more challenging of late, especially among the larger $500 million and up TEV deals with sponsors requiring more debt capital. Despite that, there are very clear signs of a renaissance in the market that have emerged in the last couple of quarters. For example, if you look at average deal count per quarter from Q1 2017 through Q4 2023, deal count in the last couple of quarters is quantitatively up against historical periods.

For example, in Q4 2024, there were 2,290 transactions globally above $100 million of TEV. If you compare that to the quarterly average in the Q1 2017-Q4 2023 period (excluding Q2 and Q3 2020 due to COVID onset), it represents 101.3% of the average. However, the average deal size is lower because financing constraints have created a bias toward smaller and easier to consummate deals. Facing the combination of the expected pause in interest rate hikes for the foreseeable future with cuts ultimately expected on the horizon; the approaching maturity wall for PE-owned assets; and elevated levels of dry powder remaining in PE, one would expect that this trend will continue and that we are already on the other side of the lull in M&A activity. [All data pulled from Pitchbook.]

MMG: What are the biggest challenges corporate acquirers face?

KB: Corporate buyers face a few headwinds. The two biggest are lower deal volumes and pricing risk appropriately. The former is addressed by hiring good buy-side advisors, but the latter can be a real challenge.

JL: Corporate acquirers in the industrial space have been experiencing headwinds in their operating performance over the last several quarters, which has turned the focus away from M&A to some extent as they look to implement cost-cutting measures and return to growth. Expectations are that Q3 and Q4 of 2023 were a low point from an earnings perspective and growth should return throughout 2024.

In the technology world, companies until recently have been dealing with gaps on pricing expectations of buyer versus seller even more dramatically than the rest of the marketplace and, in addition, have in many cases turned to cost management and layoffs to right-size their businesses in the new tighter and more expensive capital environment.

Corporate buyers face a few headwinds. The two biggest are lower deal volumes and pricing risk appropriately.

Ken Bond

Cetera Financial Group

Corporates also face an added valuation challenge, as the public market always seems to be a few quarters ahead of the private market when it comes to resetting valuation expectations. Some of our clients expressed that they had the cash and motivation to get deals done, but felt that the expectations of sellers were still just too high over the last couple of years, especially as the corporates’ own valuation multiples have drifted down. However, the gap on public valuations from their high point in the beginning of 2021 has closed throughout 2023, alleviating some of this pressure.

Finally, all acquirers have also faced a decrease in the number of processes coming their way, particularly as PE exits hit their lowest level since the global financial crisis. This doesn’t mean they can’t get deals done, but it requires much more from the M&A resources within the organization who have to go out and find bilateral/proprietary situations, which often take longer to come to conclusion.

MMG: How are interest rates impacting activity?

KB: It’s certainly keeping some buyers on the sidelines as debt costs are preventing them from being competitive. On the margin, we have seen a few busted processes for assets that were of marginal quality that probably would have transacted a few years ago.

JL: Interest rates have impacted deals in a couple of ways. First, corporates have returned to their normal share of the overall activity because they typically, except on very large deals, do not have to worry about financing and can deal in cash. The boom in deals in 2021 coincided with a spike in the share of transactions going to a PE acquirer.

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Lately at Houlihan Lokey, we have observed corporates be quite active and aggressive compared to their PE competitors in many of our sell-side processes and have seen an uptick in the number of bilateral transactions being pursued by corporates while PE is still less active relative to the torrid pace of the prior couple of years.

For sponsor-backed deals, the financing environment, especially in the syndicated market, was challenged throughout 2022 and most of 2023. Equity contributions in deals have increased and transactors are utilizing increased structure to bridge valuation and financing gaps, with minority and co-control deals, earn-outs and other mechanisms increasingly prominent in transaction conversations. We are observing a material increase in sponsors selling minority stakes in well-performing portfolio companies.

MMG: What can attendees expect from your panels?

KB: Aside from me trying desperately not to humiliate myself, “The State of Deal Terms” panel will offer brilliant insights and intel on current market trends from seasoned deal professionals!

JL: At the “Making the Right Acquisition” panel, attendees should very efficiently be able to gain a grasp on the key factors driving and shaping the current markets and get a peek into the thinking of a range of dealmakers as we look out toward the next 12 to 18 months. We’ll address some of the larger concerns and opportunities facing strategic acquirers as they work to drive shareholder value and execute on strategic plans. It will also be a good opportunity for attendees to ask questions directly of the panel in the Q&A period and to network with successful and accomplished peers in the M&A community.


Join us Monday, April 29, 2024, at the Aria in Las Vegas for the Strategic Acquirer Exclusive Forum. Register at DealMAX.org.


Hilary Collins is ACG’s Associate Editor.


Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.