News & Resources

Deal Volume Rises
In the second quarter of 2024, the Northwest (WA, OR, ID, MT, WY & AK) M&A market saw a continued rise in deal volume with 167 deals closed (down from Q2 2023). This increase maintains the shift in momentum that began in Q1 2024, when deal numbers increased for the first time since late 2022. This growth reflects positive investor sentiment moving into the second half of 2024 as macroeconomic factors continue to stabilize and rate cuts appear on the horizon.

Service Providers See Bump in Sales Volume
Business to Business (B2B) and Business to Consumer (B2C) service providers represented 65% of acquired companies in the NW market, the highest share in the last 5 years. This is partially attributable to Private Equity firms’ focus on investing in service model businesses, as exemplified in Alpine Investors’ purchase of Quick Dry Restoration via its home service platform, Guardian Restoration Partners (see page 3 for the full transaction announcement).

PEs Face Pressure to Exit Investments
At the beginning of 2024, Private Equity firms (PE) in the US owned roughly 27,000 companies, nearly half of which had been held for at least four years¹, the point at which most PE funds are expected to start distributing profits to investors. As these investments age, PE firms will be motivated to sell these platforms due to mounting pressure from limited partners who are anxious to see distributions from their investments. This effect is expected to significantly impact the size and total number of deals completed as PE firms begin to divest platform companies.

As PEs focus on preparing platform companies for sale, they will likely slow the rate at which they acquire new add-ons, instead prioritizing the integration of previously purchased add-ons and streamlining operations in their platforms. This may result in fewer smaller deals (<$10 million) being completed in the coming quarters. As large-scale exits commence, financial buyers will seek new platforms in order to put newly available capital to work. This could cause the size of deals in the next 2-3 years to rise as PE firms seek relatively larger acquisitions that will form new platforms.

Gaps in Price Targets to Start Narrowing
An increase in sales volume and stabilizing macroeconomic factors point towards a convergence between buyers and sellers in terms of valuation expectations. Eamon Brabazon, co-head of M&A for EMEA at Bank of America stated, “We are getting closer to a more normalized M&A market as agreement on price gets easier in an environment with an expected downward trajectory in interest rates, a solid economic outlook and low volatility.”² As investors see the market stabilizing, increases in deal activity and deal size can be expected as more strategic and financial investors are willing to put capital to work and pay higher prices for quality companies.

¹ Pitchbook Data
² Reuters

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