Firmex® Announces Publication of Q4 2023 Deal Flow Bulletin™
TORONTO, Nov. 8, 2023 /PRNewswire-PRWeb/ -- More than half of M&A advisors expect deal volume to increase in the fourth quarter, according to a new report from Firmex, one of the most widely used virtual data room providers. That's after a third quarter where 40% of advisors reported an increase in volume, while 35% saw no change, and 25% pointed to a volume decrease.
The Q4 2023 Deal Flow Bulletin provides readers with a forecast on deal volumes for the quarter, generated by a machine learning model that incorporates proprietary virtual data room activity, economic indicators and data from Firmex's quarterly survey of middle-market M&A practitioners. The Firmex model predicts a slight fourth-quarter volume increase of 1% in the U.S. and 8% in Europe.
The report shows the most optimism from advisors about increasing M&A activity since the start of 2022, despite a market with a complex array of signals. "Advisors across the middle market are responding to current mixed conditions and doing what they can to foster the flow of deals," said Mark Wright, general manager of Firmex. "The majority of advisors noted that the time to close deals is increasing, while also pointing to an increase in earnouts and contingent compensation in deal structures."
Key highlights in the Q4 report include
- Deal volume outlook is positive: Merger advisors are more optimistic about the pace of their business than they have been since the beginning of 2022. In our October 2023 survey, 59% of advisors expect deal volume to increase over the next three months, a big jump from 42% predicting an uptick in volume in the July survey.
- Q3 deal flow increases noted: A plurality (40%) of advisors said their volume increased in the third quarter, while a quarter said their business slowed.
- Catalyzing forces for deals: The factors that are most encouraging dealmaking are the profitability and growth of sellers and the state of the labor market.
- Valuation expectations are changing: The number of advisors who predict that deal valuations will fall (42%) is the lowest in 18 months, and those who expect valuations to increase (24%) is the highest it's been in the same period.
- Deal structures are adapting: There is a growing use of earnouts and other contingent compensation in deal structures. In this survey, 55% of advisors said these terms have become more common.
Visit firmex.com to read the Q4 2023 Deal Flow Bulletin.