Is the M&A Market Dead or Alive?

As Mark Twain once said, “The report of my death was an exaggeration.” The same is true of the M&A market. While Twain was not in robust health at the time, the full quote was as follows: “I can understand perfectly how the report of my illness got about, I have even heard on good authority that I was dead. James Ross Clemens, a cousin of mine, was seriously ill two or three weeks ago in London, but is well now. The report of my illness grew out of his illness. The report of my death was an exaggeration.’”

Perhaps Twain foresaw that someday the same question would be asked of the M&A market, for the response is the same. The death of the M&A market is an exaggeration. The market may have been ill, but it has taken its medicine. Valuation multiples are down, and buyers are exhibiting appropriate diligence in seeking out quality opportunities.

But a major shift has occurred in the M&A market. Founder owned businesses have increased in terms of the % of total deal activity, while corporate sponsors and financial sponsors have shifted their focus to being buyers. According to Pitchbook Data, Inc., founder owned businesses have increased to 61.5% of all M&A deal count in Q1 2023, up from 54% of all deals in Q4 2020.

Deals with non-backed sellers as a share of all M&A deal count:



The shift to non-backed sellers isn’t surprising.  Private Equity and Venture Capital deal sponsors are disinclined to sell portfolio companies at reduced valuations, and the number of private equity backed companies pales in comparison to the number of privately held non-backed companies.  According to PitchBook Data, Inc., in the U.S. there are:

  • 2,928 Publicly Held Companies
  • 9,736 Private Equity Backed Companies
  • 39,929 Venture Capital Backed Companies
  • 5 Million Small and Medium Sized Businesses

Sources: PitchBook, Small Business Administration • Geography: US *As of March 31, 2023*

Sheer numbers alone would suggest that with even a small pull back by the PE and VC community would result in increases in the % of M&A deals by privately held non-backed companies.  And that’s what we’re seeing.  Like Mark Twain (at the time), the death of the M&A market is an exaggeration.  But you’re more likely to find Huck Finn or Tom Sawyer selling their enterprises than J. Pierpont Morgan.

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