02 Apr M&A Market Pulse Survey Results
Adapted from a Private Equity Info post dated April 1, 2020
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.
Key Takeaways from the Survey
- 82% of respondents are seeing fewer or significantly fewer deals in the pipeline.
- About half of the deals that were expected to close are on hold.
- 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.
- There is great uncertainty around when private company financial projections are expected to solidify.
- The consensus seems to center around a 10 – 25% drop in private company valuations.
- Private equity firms are clearly in the “wait-and-see mode” with respect to new investments.
- 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.
- 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.”