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The Daily Pitch: M&A
November 4, 2022
The Daily Pitch is powered by PitchBook’s industry-defining research and best-in-class data
In today’s Daily Pitch, you’ll find:

    • An unexpected group of investment managers has begun to dabble in the stock market: venture capitalists.
    • A storm of headwinds conspired against M&A deals, according to our Global M&A Report.
  • A Morningstar report explores how awareness of a company’s strategies on data privacy concerns and security risks can benefit investors.

Slowing global M&A activity found few lifelines in Q3
Companies and investors certainly shopped till they dropped, and they might not be getting up anytime soon. Global M&A activity that had ratcheted up to record-high deal counts and values at the end of 2021 and then dropped in the new year, fell further in Q3, clocking in 29.8% down from the Q4 2021 peak.

Climbing inflation, rising interest rates, tumbling tech and healthcare stocks, and a weaker euro all worked to drag down M&A deals, according to our Q3 2022 Global M&A Report, sponsored by Liberty GTS and RBC Capital Markets.

    • Public companies’ trading multiples have plummeted from a median multiple of 3.3x revenue in 2021 to 2.3x at the end of Q3, while M&A deal multiples have held firm at 2x during the same span.
    • Private equity and corporate buyers alike snapped up business products and services companies at higher rates, as 17 deals of $1 billion or more closed in the sector in Q3.
  • The COVID-19 pandemic’s lingering effects on the labor force dragged on the healthcare industry’s pace of M&A, which typically fares well in recessionary times.
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Some LPs show support as VCs stray into stock market
Amid a dearth of private market deals stemming from a valuation disconnect between investors and founders, some VC firms are buying public equities.

Since most LPs already have public market investors, why would they want their venture managers to allocate to the same asset class, with a much higher price tag?

Some LPs may not be thrilled about this style drift, but others are supportive of VCs investing in public companies in certain situations.

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Helping you see your way through

The uncertainty in today’s market is being felt by all. Now more than ever, you need a financial partner who’s determined to help you succeed.

Learn more here

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How data privacy risks go further than investors might think
(Titima Ongkantong/Shutterstock)
In an increasingly tech-driven world, companies face more exposure than ever to data privacy concerns and security risks. Digitization enables efficiency and growth, yet it creates more points of entry—making safeguarding digital assets an enormous corporate concern.

Data breaches are the highest-profile threat, but they’re far from the only one. The acceleration of digitization through the pandemic has increased risk profiles, according to a report from Morningstar. Investors must understand different levels of risk exposure, as how companies implement mitigating measures plays a major role in determining valuations.

read the report
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European Q3 venture trends in five charts
European venture activity slowed in Q3 as the downturn began to reveal its full impact.

Here are five key trends from our Q3 2022 European Venture Report that highlight how the continent’s VC ecosystem is navigating choppier waters.

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Recommended Reads
Tech firms are bracing for tough times: Stripe and Lyft announce layoffs as Amazon taps the brakes on hiring. [Bloomberg]

Even as more employers signal an end to remote work, tech startups and their investors are betting it is here to stay. [The Wall Street Journal]

Scientists detected some of the tiniest particles in the universe and tracked them back to a supermassive black hole hidden out of Earth’s view. [Axios]

Since yesterday, the PitchBook Platform added:
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PE Deals
Sycamore to buy Lowe’s Canada division for $400M
Carlyle invests $350M in Aspen Power Partners
Orion commits $31M to telecom cable recycler
ATL acquires aerospace repair company
Odyssey-backed plastics manufacturer Pexco makes third add-on acquisition
Corporate M&A
Warburg’s Ensign to sell to Marathon for $3B

Don’t miss our upcoming webinar
With the end of 2022 approaching, the differences in the VC market from this year to last continue to come into focus.

In this webinar, our speakers will explore the lost momentum of 2022, as well as the inverse dynamic between deal sizes and deal count. They will analyze the factors that contributed to this decline and whether current market conditions will continue or revert.

Register now to secure your spot.

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Sycamore to buy Lowe’s Canada division for $400M
Sycamore Partners has agreed to purchase the Lowe’s retail business in Canada for at least $400 million in cash. The Canada division includes about 450 hardware stores, including both corporate-owned and independent affiliates, under the RONALowe’s CanadaRéno-Dépôt and Dick’s Lumber brands.
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Carlyle invests $350M in Aspen Power Partners
The Carlyle Group has acquired a stake in Aspen Power Partners, which finances, develops and operates a portfolio of distributed renewable energy resources, for $350 million. Aspen also announced it has acquired solar farm developer Safari Energy from PPL Corp.
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Orion commits $31M to telecom cable recycler
Orion Infrastructure Capital has agreed to invest up to $31 million in Subsea Environmental Services, which recovers and recycles out-of-service telecommunications cables from the sea floor. The company plans to grow by acquiring more vessels and expanding its submarine cable portfolio, among other avenues.
View details
View 11 investments »

ATL acquires aerospace repair company
ATL Partners has purchased a majority stake in Aero Accessories & Repair, which maintains, repairs and overhauls aircraft components. Aero’s founders, who manage the company, retained minority stakes.
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Odyssey-backed plastics manufacturer Pexco makes third add-on acquisition
Odyssey Investment Partners‘ portfolio company Pexco, which manufactures specialty plastics, has acquired Plastic Profiles. The transaction marks Atlanta-based Pexco’s third add-on acquisition since Odyssey purchased a majority stake in Pexco earlier in 2022.
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Warburg’s Ensign to sell to Marathon for $3B
Oil and gas company Ensign Natural Resources has agreed to sell its assets to Marathon Oil for $3 billion. Warburg Pincus formed Ensign in 2017. Kayne Private Energy Income Funds, under Kayne Anderson Capital Advisors, also made an equity investment in Ensign.
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Source: PitchBook’s H1 2022 Greater China Venture Report

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