Dealmaking Trends in Q1 2023
M&A often slows during times of uncertainty or market volatility, though this can present a time when valuations are more attractive and greater opportunities become available.
A gloomy macroeconomic backdrop and near banking crisis drove a decline in M&A activity in Q1 2023, pushing global deal value down 32% from the peak just over a year ago.
While the total M&A deal value still topped $1 trillion for the quarter, certain sellers stepped back in recent months and in some cases, lower valuation multiples encourage deal flow. Our research indicates the following:
- 86 percent of APAC dealmakers believe M&A activity will increase significantly in 2023 — the highest of any region.
- More than half see the need to increase market share as a likely driver of M&A activity.
- Three-quarters expect to spend more time over the next three years scrutinizing ESG factors during due diligence.
In early 2023 the short-term economic outlook remained clouded by global recession fears and rising interest rates as central bankers attempted to tame record inflation in many regions. The key takeaways from this include;
- Multiples on PE-led buyouts collapsed by 29% in Q1 after holding the firm for two years, reflecting a shift to smaller and cheaper deals.
- Smaller companies worth $100 million or less have seen their median enterprise value drop to a revenue multiple of 1.1x, trailing behind the overall M&A market’s median of 1.6x.
- Founder-owned businesses made up 85% of all businesses sold in Q1 (their highest share of the market ever).
Based on our experience at Durant Wyot Capital (DWC), recent deals activity, as well as insight into our client’s current deals, we are optimistic that exciting M&A opportunities lie ahead in 2023.
Doing transformational deals in today’s climate is not for the faint of heart. However, with a strong corporate background and the right strategy, our advisors at DWC welcome the opportunity to meet with you to discuss your investment goals and opportunities.
At DWC, we look forward to working with friends old and new in what is sure to be a challenging market coming our way. Reach out, let’s connect and work together.
For a confidential discussion call us on +61 2 9189 0030 or visit our website at www.durantwyotcapital.com.
