Capstone Partners Reports: Middle Market M&A Valuations Soften, Market Participants are Optimistic for a Recovery in 2024
Buyers demonstrated heightened discipline in middle market M&A processes in 2023, refraining from overextending themselves to acquire target companies. While high-quality assets still commanded solid buyer interest and competition in bidding, market clearing bids were less frequent than in prior years. In 2023, 31% of transactions closed at 10x EBITDA or higher—a decline from 38% in 2022 and 43% in 2021. This may have coincided with buyers moving to lower levels of the middle market, a common occurrence amid market uncertainty. The average enterprise value of sold target companies amounted to
Many dealmakers are optimistic that 2023 marked a trough for both middle market M&A volume and pricing, with 2024 positioned to experience a rebound in purchase multiples. Seller and buyer expectations are anticipated to become more aligned after such dislocation post-pandemic, when purchase multiples at times became detached from fundamentals. For the first time in nearly a decade, the cost of money is meaningful, and likely will be for the foreseeable future as the
Also included in this report:
- A breakdown of three-year average middle market M&A valuations by industry.
- Discussion of middle market M&A transaction volume on an industry level.
- Commentary on the operating performance of target companies sold in 2023 compared to prior years.
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For over 20 years, the firm has been a trusted advisor to leading middle market companies, offering a fully integrated range of investment banking and financial advisory services uniquely tailored to help owners, investors, and creditors through each stage of the company's lifecycle. Capstone's services include M&A advisory, debt and equity placement, corporate restructuring, special situations, valuation and fairness opinions and financial advisory services. Headquartered in
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Director of Market Intelligence
sdoherty@capstonepartners.com
617-619-3310
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