It is no surprise that M&A deal volume has fallen to a year-to-date low (S&P M&A chart below). Given that a potentially deep recession looms in 2023, would-be acquirers no doubt are placing increased scrutiny on target company sales pipelines and profitability. Less confidence in target company Revenue, EBITDA and Cash Flow combined with a significantly higher cost of capital versus a year ago translates to significantly lower valuations for target companies. Many would-be acquirers simply won’t do deals in this type of environment for fear of catching a falling knife. Further, many sellers undoubtedly (and unrealistically), want 2021 takeout valuations. That’s not going to happen. I doubt that even the Adobe Figma deal would get done today had it not been agreed upon in mid-September.
See the S&P M&A article HERE.