As for the M&A market itself, deal value drifted lower in Q2 even while the number of announced or completed deals flirted with near-record highs. Deal value fell to $873.4 billion in Q2, down 33.7% on the year.This divergence between dollar volume and deal count is the byproduct of two powerful and conflicting forces: significantly higher interest rates and the massive cash piles that remain for corporations and financial sponsors.
PE dry powder stands at $1.35 trillion, just 9.7% shy of its all-time high. An even larger cash pile is on the books of corporations. In the US, cash holdings have reportedly surpassed $5.8 trillion inclusive of reserves held overseas.
While only a portion of this is earmarked for strategic investments and acquisitions, untapped borrowing capacity and stock value easily compensate for the rest.
This tug-of-war between near-record dry powder, pushing acquirers to spend, and tight credit conditions holding them back has resulted in the stalemate we are now seeing consisting of high-frequency dealmaking at smaller sizes and lower aggregate deal value.
Many expect M&A conditions and deal flow to improve next year. Goldman Sachs, the world's largest M&A advisor, recently reported an increase in its investment banking backlog for the first time in more than a year.
While this includes other business lines, they tend to cycle together as these activities open the liquidity floodgates. Add to this the unspent cash piles on the books of corporates and financial sponsors, and you have the pre-conditions for a strong M&A rebound in 2024.
For more data and analysis, read our
Global M&A Report.