How will MM M&A turn out in a recession?
Given that bank debt is basically frozen. I could be wrong but would private credit firms still be under some pressure from their LPs to deploy capital and finance Mm lbos?
How would $200-800EV business view marketing themselves in this environment?
IMO valuations are down (a lot of these valuations are still informed by public comps which are obviously down, also LBO will be lower if higher rates) but activity is still high.
There are so many PE firms with so much money chasing assets in this space, and these firms are jumpy to deploy it. As you said, private credit firms still have plenty of dollars for debt to throw around as well.
Obviously it’s no 2021, but think things are still just fine in this space
Thanks for this, I guess should have thought about it from a PE investor’s standpoint. Do you think it will continue through 2023? It’s interesting because valuations are down, so pe firms are buying at a lower price but it’s harder to obtain financing.
With your portfolio, is your firm looking at late 2023 exits?
MM M&A is arguably the most recession proof out of all M&A/capital markets in recessions. Won't name the firm but an MD at one of our on campus info sessions gave us data to back up this claim in their company presentation. Yeah deal flow has slowed down and many bankers I spoke to are expecting a down year vs. 2021 but at many MM firms - 2021 was a record year or one of their best years in recent memory.
Agreed, MM is sought to be the most recession proof sector. It's more large-cap that would be affected in theory
Fwiw, private market valuations for tier 1 assets have not come down in most cases (from my experience). Tier 2 and below have seen corrections / broken processes but the glut of capital raised during 2020-2021 is fueling a steady stream of demand. Still plenty of dumb money out there paying last year’s multiples on inflated earnings just for the sake of deploying capital.
Majority of our financing now comes from direct lenders - much more certainty and flexibility than syndicated markets these days. May be some speed bumps and some more processes put on hold given bid/ask spreads and financing constraints, but would not worry about MM M&A activity mid-long term.
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