Report: Middle Market Deal Flow Expectations for Q3 2023

News provided by

Firmex

Aug 05, 2023, 10:05 ET

TORONTO, ONTARIO (PRWEB) August 05, 2023 -- Firmex®, a global provider of virtual data rooms, announced this week the release of their quarterly report middle market M&A. The Q3 2023 Firmex Deal Flow Bulletin™ uses virtual data room activity to forecast the volume of deals for Q3 2023 and provides advisor sentiment on deal activity by industry, the business metrics of advisory firms, as well as success rates for the quarter.

The report shows that overall, merger advisors are feeling neither positive nor negative about the middle market. In July, the most common answer to the question about their overall feeling was “neutral,” the first time it hasn’t been “positive” or “very positive” in the three years that Firmex has conducted this study.

“This quarter, it is the effect of rising rates and the accompanying tightening of bank lending standards that underpin the survey results,” said Mark Wright, Firmex’s general manager. “Advisors are working hard, as they always do, to find deals that satisfy buyers, sellers and funders in this environment.”

Additional key survey findings include:

  • Increase forecasted for announced transactions: The number of announced M&A transactions in North America is projected to increase in the third quarter, the first rise in a year and a half, according to the Firmex model. Deals are also projected to increase in Europe by a smaller amount.
  • Advisors report deal volume increase last quarter: More advisors said deal volume increased in the second quarter than said it was flat or went down. The most common prediction for the third quarter is that volume will be flat.
  • Valuations are lower: The deals that were done were at notably lower valuations than previous quarters. One-third of advisors called the prices of deals they were involved with “below average.” Nearly half of the advisors say valuations will continue to fall in the third quarter.
  • Firms increase spending on tech: We asked for the first time about the financial results of advisory firms. A bit more than a third said firm revenue had increased from a year ago. A bit less than a third said revenue had fallen. Spending on technology is increasing while travel is being cut back.
  • Mid-market sellers arrive: More sellers are coming to market, and there are some signs they are getting used to the market’s lower valuations.
  • Renewable Energy M&A thrives: The fastest-growing industry sector is renewable energy, according to 70% of advisors. Real estate is the biggest laggard.

The insights about market dynamics are drawn from an online survey conducted between late June and early July 2023. The 104 respondents were investment bankers, business brokers, and other professionals involved in middle-market mergers and acquisitions. Firmex has conducted quarterly surveys with similar methodologies since 2021.

The full report can be downloaded on the Firmex website.

Edward Stephen, Firmex, 1 416-840-4241, [email protected]