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Back to blog April 01, 2020 No Comments Author: Andy Jones

M&A Market Pulse Survey Results

We surveyed private equity firms, investment banks and mezzanine lenders to get a pulse on the overall market sentiment surrounding M&A. We wanted to solicit the wisdom-of-the-crowd to report on current conditions and to capture what industry participants collectively think about likely future outcomes.

300 M&A professionals representing 267 unique firms completed the survey that was open for 24 hours – 78% from M&A investment banks and 10% from private equity firms.

There is significant uncertainty in the market as evidenced by the range of responses for many of the questions. We provided survey participants with the resulting graphs and statistics. For example, this graph…

M&A Market Pulse Survey_Q5

 

Key Takeaways from the Survey

  1. 82% of respondents are seeing fewer or significantly fewer deals in the pipeline.
  2. About half of the deals that were expected to close are on hold.
  3. Bank terms remain unchanged for almost half of the deals that are closing. Lenders
    changing terms are requiring additional equity more than interest rate increases.
  4. There is great uncertainty around when private company financial projections are
    expected to solidify.
  5. The consensus seems to center around a 10 – 25% drop in private company valuations.
  6. Private equity firms are clearly in the “wait-and-see mode” with respect to new
    investments.
  7. Most senior lenders are not calling in their lines of credit (yet). We suspect banks are also
    in “wait-and-see” mode before they move forward with definitive actions.
  8. Most mezzanine lenders are hesitant to fund new deals.

Select Comments from Respondents

  • “Really tough to say for sure on these questions – too early. But lenders are tightening leverage finance pricing/terms. Everybody is wait-and-see. PE is holding back “dry powder” to provide cash to existing portfolio companies. Hoping existing lenders will step up, but concern that credit won’t be available even for long-term, good borrowers.”
  • “Strategic buyers are still engaged and moving forward. Conservative PE firms are in a wait-and-see mode. But a number of PE firms remain active in looking for deals. They will be advantaged by being out in the market right now.”
  • “Senior Lenders are focused on current customers seeking line expansion and short-term cash flow loans. New customers and acquisition lending has stalled.”

 

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