Cross Border Capital Advisors

DealMax 2023 Insights: Unveiling Trends in the M&A Landscape

advantage of middle market growth

Marked as the largest event of its kind globally, DealMax stands as a colossal match-making marketplace for middle and lower-middle-market companies. In its recent iteration, the event drew participation from 850+ private equity groups, family offices, and 150+ corporate buyers spanning North America. The DealMax conference, organized by the Association of Corporate Growths, unfolded in Las Vegas from May 8 to 10, 2023. This gathering convened more than 1,000 professionals from the realms of private equity and corporate M&A, fostering an environment for networking, knowledge exchange, and the exploration of prospective deal opportunities. Attendees, comprising professionals from investment banking, deal services, and corporate strategy, orchestrated a flurry of meetings and sessions during the fast-paced 2-1/2 days in Las Vegas, engaging with diverse industries, including manufacturing, business services, and technologies.

Top Takeaways from DealMax 2023

1. Surprising Surge in Deal Flow

Despite concerns stemming from sticky inflation, rising interest rates, and low labor participation rates, DealMax 2023 defied expectations. While the market anticipated a flat trend, deal flow experienced an unexpected uptick compared to Q1. The post-COVID hangover bump appears to be over, and partner involvement in numerous sell-side projects hints at a potential surge in buy-side activity.

2. Emphasis on Specialization

In the pursuit of market dominance, firms are increasingly focusing on specialization. Private equity entities, on average, plan to launch 1-3 new platforms this year, emphasizing add-ons to expand their market share. The adoption of central services for efficiency gains is on the rise, accompanied by the cross-pollination of executive leadership for a competitive edge.

3. Mezzanine Debt Resurgence

In response to the current economic landscape, capital artists are becoming more creative. Mezzanine debt, once considered a pricier option, has gained traction as higher interest rates elevate the cost of senior debt. The tightening lending environment has contributed to an increase in mezzanine activity.

4. Escalation in Post-Close Challenges

Instances of strategic buyers engaging in rollups with unsophisticated sellers are on the rise, presenting challenges in post-close modernization. Sellers lacking transaction experience, especially those from multi-generation family businesses, are grappling with the need to modernize workflows for various aspects such as revenue recognition, inventory management, leases, and more.

5. Heightened Scrutiny in Approval Processes

Investment committees are becoming discerning, setting higher standards for approvals. The focus is on assets demonstrating sustained earnings into 2023 and beyond. With reduced appetites for approving credit, cash-only deals are on the rise as investors seek to avoid debt.

6. Demand for Expert Team Assembly: Navigating the Dynamics of Portfolio Companies

A common refrain at ACG DealMax highlighted the importance of assembling the right advisory team for transactions. The need for specialized talent is more pronounced than ever to mitigate risk. Buyers and sellers are actively seeking highly specialized attorneys, accounting firms, and comprehensive coaching throughout the deal life cycle, from initial sourcing to post-close transformation.

Corporate Growth

With a wealth of experience spanning the deal life cycle, numerous professionals are prepared to assist in identifying value-creation opportunities and potential deal breakers tailored to the specific interests of buyers or sellers. Whether navigating owner transitions, conducting buy and sell-side diligence in finance, IT, and HR, or providing expertise in M&A advisory and wealth management, the mission of CBCA’s is to comprehend and support the achievement of the personal and professional goals of their connections and clients.

Author:
Cross Border Capital Advisors Editorial Team