Bankers say ‘cookie-cutter’ M&A is dead, private equity to the rescue
Private equity firms are under pressure to deploy idle capital and sell assets to realise returns, a force that should underwrite a recovery in deal flow in 2024 and 2025, snapping the capital markets drought.
Private investment funds have about $US2.2 trillion ($3.4 trillion) in dry powder, according to Preqin.
Back row: Nicola Charlston, partner, King & Wood Mallesons; Steven Baronoff, chairman of global M&A, Bank of America; and Aidan Allen, co-chief executive, Jarden Australia. Front row: Anu Aiyengar, global head of M&A, JPMorgan; and Mark Sorrell, global co-head of M&A, Goldman Sachs.
Anu Aiyengar, JPMorgan’s global head of M&A, said exit activity was “muted” this year due to macroeconomic volatility and a “constrained” initial public offering market. This thematic was “unsustainable”, however, because private equity had to create liquidity events for its portfolio holdings.
“In 2024 and 2025, we will likely see a lot of these assets coming up for some type of monetisation,” said Ms Aiyengar on Tuesday, adding that IPOs from 2020 and 2021 that still had private investment tied up would be ripe for sale.
“Cookie-cutter” approaches to mergers and acquisitions are making way for more bilateral agreements, as dealmakers navigate an environment of lower valuations and fewer deals.
Globally, M&A volumes have slumped this year because companies have stayed gun shy about signing deals as they adjust to higher interest rates and depressed equity.
Keen buyers are engaging in unsolicited takeover bids, while tougher talking regulators from Wall Street to Australia have meant that mergers are taking longer to close.
“The number of agencies exercising their voice have gone up significantly… There is almost an assumption that
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