Boston, MA – Capstone Partners released its Q2 2020 Capital Markets Update today, reporting that middle market merger and acquisition (M&A) activity has declined 21.6% year-over-year (YOY) through Q2 as COVID-19 severely impacted transaction volume. Buyers have focused internally to mitigate operational and financial disruptions due to COVID-19 while lenders have concentrated on protecting their loan portfolios. Private equity (PE) middle market deal activity fell nearly 50% YOY through Q2, as PE firms focused on the health of platform investments while primarily pursuing smaller add-on acquisitions. Despite challenging conditions, Capstone has maintained a healthy deal pipeline of quality targets through Q2 despite seller and buyer hesitancy due to uncertainty.
“Deal makers are against the ropes taking a beating but are showing remarkable adaptability and resiliency,” Capstone Founder and CEO, John Ferrara, commented on the Q2 Capital Markets’ performance. “Looking ahead, I am certain of two things: (1) deal making (and in general, the world) will remain constrained until scientists develop a pharmaceutical solution to COVID, and (2) we will continue to see new forms of adaptability and innovation across the deal market ecosystem (and in general, the world) as we adapt to a new normal.”
Although near-term headwinds persist, positive M&A market dynamics that are expected to promote improved performance toward the end of 2020 and into 2021 include: an arsenal of PE dry powder that needs to be deployed; buyers seeking high-quality targets at lower valuations; and a forecasted imbalance of supply and demand of targets seeking to sell.
In addition to valuable insights into middle market M&A activity, the report provides comprehensive commentary on Leveraged Finance, Bankruptcy and Restructuring, and the Industrials market.
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