Private equity gets ready for game day: Q2’23 M&A trends in PE

Uncertainties about where rates and the overall economy are headed, and other pressures, including banking leverage conservatism, higher costs of labor, energy, and other costs, have slowed the pace of mergers and acquisitions.

But many PE portfolio companies are as busy as ever, sticking with their original deal theses and strengthening themselves via buy and build acquisition strategies. In addition, they are focusing on integration, cost containment, and working capital management.

Private equity leaders know that the most anticipated recession in history may soon be behind us, and that buyers will emerge as the market stabilizes, running hard at high-quality assets as they need to deploy capital. 

We expect inflation and debt markets to stabilize with one more rate hike in 2023. As valuations recover and investors look for opportunities to use dry powder, a recovery in lower mid-market deals is likely to begin in Q4 this year, with larger deals picking up in Q1 and Q2 of 2024, followed by an acceleration of portfolio company exits in the last half of the year. "The question is whether PE firms will be positioned properly in time for the anticipated thaw,” said Dean Bell, Market Activation Leader, Deal Advisory and Strategy at KPMG.

In this report, we take deep dives into three PE teams’ efforts to create value now in their portfolio companies as holding periods have become extended.