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National Data for Q1 of 2023
Mergers & Acquisitions
M&A activity, based on deal counts, is expected to be relatively flat compared to the last two years; however, aggregate deal values are continuing a recent trend of decreasing. The average deal size is decreasing due to a combination of declining earnings multiples and buyers focusing more on sub-$100 million deals that carry lower multiples than larger deals.
Reported valuation multiples dropped by approximately 14% in the first quarter. A large driver of this was less use of debt leverage by financial buyers. A higher than usual percentage of deals were all-equity and the use of debt leverage dropped by half during the quarter. Sellers are absorbing portion of the leverage gap through lower valuations while buyers are investing more equity.
After accelerating growth investments from Q3 2020 through Q1 2022, private equity firms slowed their growth investments during the last four quarters. However, the combination of significant dry powder and lower valuations could lead to an up-tick in activity.