M&A Deal Trends Update Q4 2022

The second half of 2022 has brought much more uncertainty to marketing and tech service providers. Even those in high demand and winning lots of business are not immune to the economic climate.

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Don't get it wrong - this year will still go down as one of the best for M&A in recent memory. Deal volumes are still ahead of pre-pandemic levels and TMT is expected to maintain its sector-leading status for M&A investment into 2023. It has certainly been a record year for SI Partners, with 20 deals completed globally in the year to date - and there are still a few more weeks to go.

We are starting to see signs of more caution in the market. One of the more curious effects of this in certain segments demand is out stripping supply. The owners of the most sought after and valuable assets are perhaps thinking twice before selling in the face of so much uncertainty. Ironically, that's generating more competition among buyers and keeping prices for the very best assets at an all time high. 

Elsewhere, the seller/buyers valuation gap is widening, with some sellers unwilling to let go of the super premiums that were on offer a year ago, while buyers are looking to price in higher levels of risk to hasten the return of multiples to their long term averages. Which of course is inevitable in the not too distant future. 

Economic uncertainty also means that some acquirers are taking more time to make decisions. They need to re-evaluate their growth plans and corresponding M&A strategies, and in a big company this is a complex time consuming task. 

Private Equity on the other hand continues to move quickly to deploy the funds they have already raised. They have simple criteria and short decision making chains which gives them a big advantage in the competitive deal processes. As a result, their share of the M&A pie has continued to grow this year and we expect to see this trend to continue into 2023.

So what does this mean for a business owner contemplating a sale in 2023?

Well our number one piece of advise is to work hard on substantiating your growth plan. Multiples are simply a reflection of expected future earnings, so building a buyers confidence in future trading will generate a lot more interest and value than simply battening down the hatches to optimise short term profit. 

Get this right (and a few more things) and you have every chance of finding the right deal in this rapidly expanding buyer universe.

Read more on our latest M&A Deals and Transactions.