On September 28, 2022, Cooley sponsored the third virtual event in Axios’ Dealmakers series: A Conversation on M&A in Today’s Market. The event highlighted discussions surrounding the ever-changing dealmaking landscape of today and the impact of a recession on the future of the market.
Axios technology and business reporter Kia Kokalitcheva and business editor Dan Primack had conversations with Kirsten Green, founder and managing partner at Forerunner Ventures, and Christina Mohr, vice chair of global M&A at Citi. Fabricio Drumond, Axios’ chief business officer, then led a “View From the Top” segment with Jamie Leigh – Cooley partner, member of the business department leadership team and M&A co-chair.
In their discussion, Leigh and Drumond surveyed 2022’s volatile deal flow, market outlook and impacts on various deal participants. Key takeaways include:
- In the tech sector, there’s a consistent lure of platform building, talent acquisition and accretive product acquisition at lower multiples and small deal ranges. In the life sciences sector, some target companies now have an incentive to head off near-term financing gaps, while buyers have the ability to hunt targets with less competitive valuation pressure.
- Today’s buyers are looking for bargains, and with less competition for assets in today’s marketplace, this is an opportunistic window for savvy, confident buyers.
- On the sell side, well-funded companies are not in the market to sell, but instead are hunkering down to focus on core competencies until better valuations return. There is also an exception here of management and key leadership fatigue.
- A big theme for private equity is financing, which comes with the challenge of having confidence in the debt markets and/or consistency of equity checks. With the decline in multiples, PE buyers are more active in the public markets than ever. For those looking to sell to PE, there must be a healthy acceptance for reduced multiples. When the markets do stabilize, we expect a blistering pace from PE, given all of the dry powder under management.
- An intense antitrust and regulatory environment potentially may quell deal psychology for the tech industry. Simultaneously, there are tailwinds for tech: We always ride large waves of M&A following early periods of explosive growth (fintech, ecommerce, etc.).
- Successful companies in today’s M&A market are prepared with strong plans. They’re spending many hours with their clients preparing for activism, as well as environmental, social and governance (ESG) scrutiny, and potential hostile or unsolicited activity. On the buy side, clients are using this “downtime” to reassess strategy, while on the sell side, clients are experiencing a sober assessment of cash and operational needs.