10 Takeaways from Macabacus Mid-Year Update

The mergers and acquisitions landscape in 2024 is characterized by increasing complexity, regulatory scrutiny, and the need for innovative deal structures. Macabacus and Transacted recently released a report on “The State of Transactions” offering valuable insights into the current M&A environment. Here are 10 key takeaways we got from this mid-year update.

1. Valuation Resilience: Despite market turbulence, the median private company EV/EBITDA multiple remains steady at 9.5x, mirroring 2023 levels. This stability underscores the enduring appeal of quality assets.

2. Heightened Antitrust Enforcement: In an unprecedented move, the FTC and DOJ challenged 50 deals in 2022, surpassing the 47-second requests issued. This signals a new era of regulatory vigilance.

3. Record Deal Restructurings: A staggering 23 transactions were either abandoned or restructured due to antitrust concerns in 2022 – a two-decade high. This underscores the critical need for robust regulatory strategy in deal planning.

4. Private Equity’s Growing Role in Divestitures: Financial sponsors now account for 13.8% of corporate divestitures, up from 9.6% in 2010, indicating their increasing appetite for complex carve-out opportunities.

5. Earnout Surge: Nearly one-third of private equity deals in the first three quarters of 2023 included earnouts, up from 21% year-over-year. This trend reflects a strategic approach to bridging valuation gaps in uncertain markets.

6. Joint Venture Renaissance: 2024 is on track to set a record for financial sponsor joint ventures, highlighting a shift towards collaborative deal structures.

7. Sector-Specific Divestiture Trends: Information Technology (17.2%), Health Care (14.5%), and Industrials (12.2%) led corporate divestitures in 2023, pinpointing hotspots for restructuring and value creation.

8. Protracted Antitrust Reviews: The average duration of significant merger investigations has ballooned to 15.4 months in Q4 2022, up from 11.8 months in the previous year, necessitating longer deal timelines.

9. Corporate Cash Reserves at All-Time Highs: With aggregate and median cash balances reaching historic peaks, the stage is set for potentially increased M&A activity from strategic buyers.

10. Deal Complexity Intensification: While not quantifiable, the report emphasizes a marked increase in deal complexity due to novel transaction structures, financing intricacies, and cross-border considerations.

Looking Ahead

As we navigate through 2024, the M&A landscape presents both challenges and opportunities. Success will hinge on the ability to anticipate regulatory hurdles, structure deals creatively, and execute with precision. Dealmakers who can adapt to this new environment – leveraging technology, embracing innovative structures, and maintaining a laser focus on value creation – will be best positioned to thrive.

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Get the full report here.