Better days ahead? Q4'23 M&A trends in private equity

For PE deal makers, 2023 was another tough year. Elevated levels of inflation, interest rates, and valuations combined to put a major damper on deal making. Transactions fell 28.9 percent from 2022 while their overall value sank 45.2 percent.

Yet there were significant deals, including the $12.5 billion bid for software developer Qualtrics by Silver Lake and CCP Investments, and the planned $9.6 billion acquisition of sandwich chain Subway by Roark Capital Group. The most active sectors were technology, media, and telecom in deal value and industrial manufacturing in deal count.

Notable trends in the PE deal market in 2023 included:

• Smaller deals: Given the high cost of capital to fund transactions, in 2023 PE deal makers focused more on taking minority stakes than acquiring companies outright.
• Active secondary market: Driven by prolonged ownership periods due to delayed exits, PE firms increasingly engaged in continuation funds and the like in an effort to return capital to investors.
• Rise of private capital: Cash-rich PE firms became an alternative funding source for corporate borrowers when the collapse of several regional lenders slowed bank lending in early 2023.

Entering 2024, early signs point to a lifting fog of macroeconomic uncertainty and a turnaround in PE deal makers’ confidence. With record dry powder and moderating valuations, the worst looks to be over—even if the PE M&A market will only pick up steam slowly.

Download your copy of our comprehensive review of the PE deal trends in 2023 and what to expect in 2024.