Will we see an uptick of take-private deals in 2023?
News, insights and updates from the team at Bloom Equity Partners
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2023 Private Equity Predictions
Is deal fatigue setting in on larger PE deals? Given the same macro headwinds that have faced PE deal activity across the board in 2022, mega buyouts have become increasingly more difficult to finance with debt capital. This can be seen can see in recent trends affecting take-privates, which tend to be the largest buyout deals in any given year.
According to a recent pitchbook report, November was the second month since 2006 to not have a single take-private deal announced. This was quickly shadowed by the Thoma bravo $8 Billion acquisition of Coupa software, earlier this month. So what does this mean for the future of take-private deals in 2023?
It appears unlikely that take-private transactions will slow down any time soon. The logic still makes sense for buyers to scoop up attractive public companies at significant discounts while private market valuations are often lagging public comps.
Of the 75 public-to-private acquisitions announced this year, PE firms paid an average discount of 6.7% to the target’s 52-week share price high. This was no small doing given that these stocks typically rose by 20% to 30% from their unaffected share prices prior to their deal announcements. In a normal environment, takeover announcements usually send shares of the acquired company to fresh 52-week highs, but because valuations have been beaten down so badly—down 24.5% on the S&P 500 through mid-October—this year has been the exception.
Additionally, these companies have a more transparent record of operating results, which in theory should make them more bankable for lending purposes.
Final Thoughts
Investors across the board seem to be bullish on the take-private strategy for 2023. In his recent 2023 predictions post, Tomasz Tunguz (Ex- Redpoint MD), expressed his confidence in the strategy when it relates to software acquisitions:
Private equity acquires 10% of the 70+ publicly traded software companies by the end of the year. With hundreds of billions of dry powder, plenty of healthy cash flows generated by SaaS publics, & the leverage of the inevitable shareholder lawsuit if a board rebuffs the 30% premium of a tender offer, private equity becomes the dominant M&A option in dollar terms for 2023.
What We’re Reading and Listening To…
📚 Growth at all costs is no longer being rewarded
📚 A List of SaaS Benchmark Reports & Potential Dangers
📚 Vertical Acquisition Strategies
Favorites from the Ecosystem
Investors👇…..
Founders👇….
Operators👇….
News from the Industry: deals, deals, and more deals 💰
BC Partners considers selling a stake in compliance software firm Navex-sources
Vista Equity Partners acquires KnowBe4 in $4.6bn deal
WorkJam Gets $50 Million Growth Investment
End Note 🔚
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