The slight taper in deal volume could be moderated, at least in part, by corporate divestitures, says William Blair managing director and head of corporate advisory Christina Bresani. “It’s been a very strong M&A market,” she tells us. “When you have the opportunity to monetize an asset at a stronger multiple than you acquired it, it’s a great time to sell.”
Surging valuations could provide a strong tailwind for conglomerates to shed non-core units, especially as the upward trend shows some signs of abating. Middle-market private equity firms increasingly see market turbulence as an opportunity to secure reasonable valuations in sectors otherwise valued frothily. Firms are still pursuing targets in their typical geographic, Ebitda, and sector strike zones, but are showing less willingness to stretch on valuation.
Strategics should be similarly opportunistic.
“Companies should, if they’re not, be regularly looking at the various divisions they play in, figuring out, ‘Can I be a real player in this sector?’” Bresani says, “If I’m not, what do I need to invest to do that?”
Corporates can plow divestiture sale proceeds into more attractive opportunities to take advantage of the current market location. Particularly active sectors in the months ahead could include industrials and healthcare, Bresani notes.
–Brandon Zero
