Trend Watch

THE LATEST IN DEALS, FUNDRAISING AND PEOPLE MOVES IN THE MIDDLE MARKET

Deal Roundup

M&A trends from the fourth quarter signal an expected slowdown.

IN PERSPECTIVE: PRIVATE EQUITY

Crossplane Capital’s Katie Oswald on how the PE business development profession has evolved.

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IN PERSPECTIVE: INVESTMENT BANKING

Stout's Eric Welsch discusses guiding investors through challenges and opportunities.

Focus On Fundraising

Why continuation funds have staying power.

On The Move

Recent hires and promotions among middle-market investors and advisors.

Our Middle Market Multiples report published in December offered data and perspectives from sources pointing to slower deal activity in 2023 because of worsening market conditions. The last quarter of 2022 already showed some of that expected slowdown— with sponsors seeing less deal flow from banks, lenders being increasingly cautious about which loans they take on, auctions taking longer to close and companies being more meticulous about getting their house in order before going to market.

Although year-end data wasn’t yet available at the time of writing, several investors and advisors say the end of the year showed less activity than usual. How bad things are getting depends on who you talk to. Investment bankers are often optimistic about deal flow because M&A is their bread and butter, while private equity firms are being selective and mostly focusing on addons. Lenders are especially cautious in this environment to avoid deals that could result in defaults.

“Bankers tend to focus on continued market strength while private equity is talking about a readjustment on pricing,” says Bob Goldsmith, founder and president at Northern Edge Advisors, a New York-based lower middle-market investment bank.

Still, several mid-market firms announced deals in December. Wind Point Partners’ Smart Care bought refrigeration company Refrigeration Anytime, while Cornell Capital’s Ingenovis Health acquired Springboard Healthcare, a healthcare staffing business. Gryphon Investors-backed Right Time also bought a Canadian HVAC business, Dunn Heating and Air Conditioning, in December.

Many firms transacting today are