Global Private Equity and Venture Capital Deals Experience Sharp Drop in July

by Warren Seah

The latest data from S&P Global Market Intelligence reveals a significant decline of 36% in global private equity and venture capital deals for the month of July. Compared to the previous year, there were only 828 transactions, down from 1,290.

Although deal volume decreased, the total value of global private equity and venture capital deals saw a positive rise of 10% in July, reaching $44.3 billion. This increase can be attributed to GTCR LLC’s notable acquisition of 55% of payment processing services provider WorldPay (UK) Ltd, amounting to $12.7 billion.

However, the year-to-date total deal value as of July 31 witnessed a staggering drop of 44%, falling to just under $276 billion from $493.4 billion. The number of deals also experienced a significant decline, with only 6,850 recorded compared to 11,000 during the same period.

In the United States, middle-market private equity deals account for a substantial portion of the overall deal count. Thankfully, experts in the industry believe that the worst of the M&A lull in middle-market private market deals is behind us.

According to Donald McCree, the vice chairman and head of commercial banking at Citizens Financial Group Inc., activity in this sector is starting to pick up. He stated, “Buyers and sellers are starting to reconcile values while other sellers have been waiting for years now and they just want to get out.”

McCree also mentioned that with the Federal Reserve’s expected minimal increase of another 50 basis points, stability is gradually returning to the market. As a result, he believes that “people are in a better mood.”

The future of global private equity and venture capital deals remains uncertain, but there are signs of optimism for the end of the year. The market may be experiencing a temporary setback, but there is hope for a revival in the coming months.

Investment Banking Advisory on M&A Deals: A Promising Outlook

Despite a relatively quiet year for investment banking advisory on M&A deals, there are signs of optimism heading into the fourth quarter. Market conditions have deterred buyers and sellers from active participation, resulting in a stagnant market. However, industry experts believe that progress is on the horizon.

One of the factors contributing to the current state of affairs is the impact of the COVID-19 pandemic on cash flow numbers. The fluctuating effects of the pandemic, coupled with supply chain constraints, have disrupted buy and sell prices. Additionally, higher interest rates have presented challenges in the financing market.

While these obstacles may seem daunting, it is important to note that interest rates remain relatively low compared to historical standards. As a result, buyers and sellers are gradually coming to terms with their values. Moreover, some sellers who have been patiently waiting for years are now eager to exit the market.

Goldman Sachs Group Inc. CEO, David Solomon, acknowledges that the current M&A market has experienced a decade-low level of activity. However, he expresses confidence in a future resurgence, stating that this recessionary period is merely temporary.

It is evident that the investment banking landscape is evolving, with a more promising outlook on the horizon. The industry anticipates a revitalization as market players adapt to the changing dynamics.

Also read: Fitch lowers U.S. banks’ ‘operating environment’ score a notch to aa-, says higher interest rates a factor

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