George Helock, CPA’s Post

In H1 2024, exit multiples have held steady, continuing at the ongoing 13x range from 2021. Some private equity firms have managed partial exits through continuation funds and minority recapitalizations, and despite some economic headwinds, dealmaker confidence is returning to pre-2020 levels. However, private equity-backed IPOs remain muted due to delayed interest rate cuts. As we head into H2, I anticipate companies with strong dynamics, supported by an expected rate cut, to be poised for successful exits. Learn more: https://lnkd.in/eUnnjU4R

Happy M&A Monday! Despite the current choppy #mergersandacquisitions market, we continue to see many companies in the health and commercial service sectors being rolled up, commercialized, and then sold or merged into larger private equity platforms. For those unfamiliar with the roll-up #privateequity strategy, the concept is simple: acquire smaller businesses at lower prices, implement value-add improvements like back-end support and executive leadership to boost profitability, and then sell these combined businesses as part of a larger, more valuable entity at a higher price. However, even with this strategy, certain types of private equity exits can be challenging, as explained by my colleague Louis Lehot: https://lnkd.in/gzj9EAG7. The private equity roll-up approach comes with its own set of challenges. One of the most critical is #accounting. Often, the small businesses being acquired are not GAAP-compliant; they typically only have reviewed financial statements. Why is that a problem? Reviewed financials don’t follow the same rigorous #GAAP standards, leading to inconsistencies in how financial information is presented and interpreted. This can result in overpaying for a business and having inaccurate financial projections, affecting future financing or a successful exit. As any business owner knows, accurate and consistent financial information is essential for strategic decision-making. Private equity roll-ups can be highly profitable, but developing a proactive approach to financial due diligence is crucial to mitigate risks and ensure a smoother, more successful roll-up strategy and eventual exit. #foleyforward #foleyignite #privateequity 

In 2024, the private equity industry is grappling with a unique situation characterized by record levels of unspent investor cash and a significant backlog of aging deals that need to be sold. As of mid-December 2023, private equity firms were holding an unprecedented $2.59 trillion in cash reserves for buyouts and other investments, with the largest groups like Apollo Global Management, Inc., Blackstone, KKR, CVC Capital Partners, and Advent International holding nearly a quarter of this amount. The industry is facing a challenge in selling down large investments and finding new opportunities. This is partly due to a tepid market for IPOs and a global slowdown in deal-making, leading to a near-decade low in private equity exit transactions in the last quarter, as reported by Bain & Company. This situation has resulted in a record $2.8 trillion in unsold investments, creating what Bain describes as “a towering backlog” of companies needing to be exited. This has caused anxiety among private equity owners, with the path forward for asset sales remaining uncertain. The slow pace of returns has frustrated many large institutional investors who are accustomed to a regular flow of cash from the sale of profitable investments. Over the past five years, these investors have seen only a minimal return on their investments despite committing large sums to new buyout deals. There is growing optimism, however, that US interest rates may have peaked after a significant rise, encouraging groups to activate their cash reserves and sell old investments. Industry experts anticipate a potential acceleration in deal activity in 2024. To facilitate transactions, many private equity groups are resorting to financial engineering tactics to bridge the gap between buyer and seller price expectations. These tactics include structured transactions that combine equity and debt-like features, performance-based earn-outs, deferred payments, and large rollover investments. One significant trend in the private equity sector is the focus on corporate carve-outs, where a firm buys a business line from a large corporation. The largest deal of 2023 was GTCR's $18 billion carve-out of Worldpay from FIS. Many large buyout firms are looking to replicate such large-scale carve-out deals in 2024. https://lnkd.in/ghVSeXZR

Happy New Year! Unlocking M&A potential in 2024 🚀 The year 2023 threw challenges at the global M&A scene with a 20% dip, hitting Private Equity and Venture Capital hard, according to Bain & Company. Now, PE firms juggle trillions in unsold investments, facing pressure from LPs for cash returns. What's next? Brace for a shift in strategy. 2024 holds the promise of overdue deals making a comeback, but with a twist. I'd expect more intricate transactions featuring structured financing, performance-based earn-outs, and corporate carve-outs. It's about optimizing capital structures and ensuring sustainable outcomes. As an M&A advisor, I'm excited about the opportunities this dynamic landscape presents. Ready for a year of strategic moves and innovative deal structures. #mergersandacquisitions #transactions #dealmaking #2024outlook #privateequity #venturecapital #financialtimes

" I’d highlight three additional trends. One is, whatever way you look at it, the deal cycle is speeding up and exits are heating up. Second, we’re seeing a much closer relationship between the corporate world and our private capital world in terms of both carve-outs and partnerships. And third is the importance of real value creation driven by top-line growth, cost optimization, and management of the balance sheet. We’re in a different world when it comes to cost of capital. That means we’re going to need to pull hard on all levers on the P&L and balance sheet to make this work. " #pe #privateequity #deals #m&a https://lnkd.in/d6RSkQxT

Interesting article in the Financial Times that reflects a lot of info I’ve read/heard from clients on the state of PE in 2024. Looking forward to a pick up in activity this year!

"That has left #buyout groups with a record $2.8tn in unsold #investments and what Bain described as “a towering backlog” of companies to exit." #privatequity #finance #economics #future #leverage #lbo #ipo #mergersandacquisitions #markets #institutionalinvestors

Private Equity Firms are sitting on a record $2.59tn in cash reserves available for buyouts and other investments. While many of our clients are hopeful for an uptick in new deal flow, following a downturn in '23, this year presents a big test for private equity investors as they seek ways to sell down large investments while searching for new opportunities. Read more via Financial Times #privateequity #duediligence

Smaller Deals on the Rise in Private Equity According to new data from Private Equity Info, private equity firms are focusing more on smaller deals under $50 million in 2023 and the first half of 2024. This cautious approach marks a shift back to pre-pandemic trends, driven by current economic conditions, higher interest rates, and inflation. In his latest article, Andy Jones explores this trend and its implications for the industry. With larger deals on the decline, the sentiment is clear: "If acquisitions are a mistake in this season, then make them small." Discover how these shifts might impact your investment strategies and the broader private equity landscape. https://buff.ly/3SJMC4q #privateequity

As a research database and information services company serving the middle market M&A community for 20 years, Private Equity Info ingest enormous amounts of data surrounding transactions, firms, and executives. In addition, our team engages in many conversations daily across the spectrum of investors, investment bankers, and service providers to the M&A community. This unique combination of hard data from our database and anecdotal commentary from informed thought leaders regularly provides us with “ahead of the curve” observations. Below are several trends we are observing in our data and hearing in the marketplace. Throughout 2024 and 2025, we expect private equity firms to amplify their focus on platform investments, compared to 2023, to heavily weighted investments in select growth industry verticals, thoroughly researching and vetting target niches upfront, and to identify bolt-on acquisitions early in the process, shortening the time required to integrate add-on acquisitions. To read more click here