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2023 Dealmaking Outlook: Tight Markets Ahead as Private Equity Funds Eye Opportunities

With 2022 coming to a close and with it an era of cheap money, the dealmaking industry must prepare for tighter markets in 2023. The global volume of deals this year decreased by 38 per cent compared to 2021 as debt markets froze up, particularly in the second half of the year. Nonetheless, we have seen some very interesting transactions this year, from Musk's twitter buyout to deal frenzies in tech and sports franchises. Despite a bleak outlook for 2023, there are a few factors that could drive the industry next year. Private Equity funds are sitting on sizeable amounts of dry powder and have slowed down their pace of deploying funds. If the debt markets open up, PE firms could look to start deploying their capital at a faster rate. Additionally companies with strong balance sheets may look to capitalise on falling valuations. That said let's look at what happened this week:

  1. Goldman set to cut more jobs: CEO David Solomon announced to his staff that the management is working on cutting a further 8 percent of its workforce which represents about 4000 employees.

  2. What's next for SPACs?: The SPAC frenzy is coming to an unpleasant close as deal making cools down. SPAC tie ups that were agreed during better markets are falling apart and prominent investors in the space such as Chamath Palihapitiya and Bill Ackman have liquidated their SPACs. With 650 SPACs and $159 billion of IPO capital chasing merger targets and regulators' increased scrutiny on this practice it seems likely that more liquidations are to ensue.

  3. Bluestem Equity, a private investment partnership based in Houston has acquired United Vision Logistics. This adds a transportation and logistics service provider to the construction and industrial sector focused partnership's portfolio.

  4. L Catterton, the consumer focused investment firm led a $70 million funding round for Razor Group, an aggregator of e-commerce consumer goods businesses.

The Junior IB team wishes everyone a Happy New Year!

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