S&P’s Capital IQ market intelligence report reveals that the slowdown in M&A activity that started in 2016 continued into the first quarter of 2017 in terms of the number of closed deals (excluding oil & gas and real estate).
The dollar value of closed M&A deals managed a slight 2% increase, however:
We hear private equity groups and other capital allocators bemoan the lack of quality deal flow while we work hard every day to close that gap.
One interesting observation from the inside is that virtually every PEG we interact with that has a presence in Healthcare Services and Financial Services informs us that they are aggressively seeking quality acquisition candidates yet these two sectors show the largest year over year declines:
The schizophrenic market conditions continue. PEGs want deals yet many have become incredibly fastidious in their analysis of quality deals, bouncing them for reasons that are often difficult to articulate or that ordinarily would not be cause for concern beyond the normal due diligence processes.
We still consider the Healthcare and Financial Services sectors to be in high demand based on our work with capital allocators. The current market requires much more marketing than the average deal typically requires. It has never been easy to place a deal but in the present market, if it is not love at first sight, we are finding that it is requiring two to three times longer to find the right partner and we have to market the deal to four to five times the number of potential partners than we market the typical deal to.
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At Vertical Capital Advisors, we are most often engaged by industry leaders to be the bridge to the capital they need to fuel growth. We start with great leaders at great companies that have compelling, profitable business plans where the only missing ingredient is capital.
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