Capstone Capital Markets Update - March 2021

Middle Market Demonstrates Strong Recovery in Q4

In our Q4 2020 Capital Markets M&A Update, Capstone Partners reveals expectations of pent-up merger and acquisition (M&A) demand to come to market in the near term. Favorable market dynamics include increased availability of capital, historic levels of dry powder, and a surplus of sellers motivated to transact in the current favorable tax environment ahead of potential negative capital gains treatment under the new presidential administration.

Included in this report:

  • How deal activity showed a strong resurgence in Q4, increasing 39% from the prior quarter despite a 16% year-over-year (YOY) decline in 2020
  • Factors that led to the normalization of the lending environment near pre-COVID levels, especially for companies in resilient industries
  • Changes in strategic buyer and private equity mindsets, shifting from risk mitigation and operational stability at the onset of the pandemic to rapid capital deployment at year-end
  • Why add-on acquisitions accounted for 72.5% of private equity buyouts in 2020
  • Capstone’s expectations for deal volume in 2021

Expect an interesting, exciting, and historically active 2021 with ultra-favorable financial market conditions and rapid COVID-related changes across industries. Dislocation creates opportunity. This is a time for strategic M&A to take a front row seat.

Phil SeefriedVice Chairman, Capstone Partners

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