How bad is deal flow right now?

I am busy as shit but I work in corp dev at Dominion Energy and… well, just read some news articles about the company and you will understand

Things have been picking up in my group a lot last few months (relatively speaking). But still way too many pitches.

MM PE,

Partners say this is the worst they’ve seen since 2008. Anything that does seem interesting has an absurd multiple attached to it.

Out of curiosity are any banks killing it in this environment?

PF is on fire, seems like everyone is short staffed across the board

Just had an "interview" with a smaller IB and was very skeptical as I just did a Google search and the first thing that popped up was that they lost a lot of money for some of their clients. Just hesitant because of what I found on Google. I won’t name drop the company but they are smaller company and they are brokers. I would like any tips and advice on how to go about this if I move on to the second round. Thanks!

Interesting thoughts above.

What I see in private markets is a general gap between valuations expectations and current valuations buyers are ready to pay for in this current macro environment. We see a lot of process starting as "market soundings" and then getting pulled out because of this gap. PE-owned assets and other private assets will still need a bit more time to readjust their expectations and accept the lower multiples (we have been seeing that for a while, and start to see a beginning of a shift). Also, IPOs getting pulled out, same reasons. Many funds will have to sell at some point so it will unlock eventually.

What doesn't help is the high interests rates and high inflation who are here to stay: this distorts the traditional returns you would have been able to do over the last decades, and this will indeed move away LPs capital allocation from PE to other asset class, in particular credit, resulting again in less M&A.

I'm still super hopeful for the near future and don't think this is structural, there might be less deals than 2021 on a long-term basis, but still many ways to get creative, people will still continue to create value, high-quality or heavy-operational improvements or high growth assets will for sure continue to present themselves and there will be a market for this! Obviously, hugely sector dependant and geography dependant .

We (large public IT Services / Consulting firm) have seen a whole bunch of deals being soft-marketed or fully-marketed to us in the past year but most stink. A ton of PE shops trying to offload their less successful acquisitions without having to take a write-down. Funny but apparently a good amount have come in the form of soft-sells directly from MM sponsors. Sort of a "Hey, we're totally not trying to sell this asset because it's totally not underperforming our expectations and all but uhhhhhh if you would entertain 17.5x EBITDA on a negative growth Cloud Migration Consulting rollup platform that we never actually integrated, we'd be super interested". 

I just started but allegedly our Strategic Finance arm has seen a good bit of that recently.

most of my deals are quiet for the last few weeks but expect to really kick of early next year

Another dynamic I am seeing is demand for quality assets and nervousness around PE firms not deploying capital. It seems like in order to win a bid for a quality company, you still need to pay an absurd amount because funds know they need to do something and there aren’t enough quality companies to go around. Curious if anyone else is seeing this.

A lot of processes ongoing, some very large. We are getting crushed.

With that being said, you can really tell people are anxious and the success-rate has gone down a lot, I’ve had 3 deals fall apart 1-2 days before signing date this year because of the market sentiment etc.

I’ve been mostly on live stuff all year and my group beat its budget for the year already, hoping bonus is good but I’m scared it’ll be dragged by non-performing groups

Yea busy with artificial work

PCA here - work is popping off, and deals are up. Imo PCA is one of the few divisions that hasn’t seem deal volume decrease but actually actively on the rise. Cross my fingers for my M&A and RX brothers out there.

I think it's pretty bad right now due to the uncertainty and mismatch in expectations. The uncertainty is quite high as people still don't really know what will happen with interest rates / inflation / the economy. Interest rates seem quite stable at the moment, but it appears that they will stay high for much longer than initially expected and if inflation doesn't continue to come down the rates would get even worse. As no one knows whether interest rates will decrease sharply next year, remain flat at high levels for a long period of time, or increase even more, pricing assets is not as easy as it used to be in a very predictable environment where rates remained somewhat flat at low levels. This is especially the case if you also consider that there is great uncertainty regarding economic and geopolitical developments. 

I also think that there is a mismatch in terms of expectations. A seller will still look back to valuations seen in 2021 / early 2022 while buyers will have a much more conservative valuation to account for higher rates and uncertainty. There is also the question of returns. I think many PE firms see that selling at current prices would significantly impact their returns. As a result, they decide to keep the hope alive by delaying exits, hoping that valuations will "normalize" soon. This results in a negative cycle. Fewer exits of course impact deal activity directly, but also indirectly. As fewer PE firms exit their investments, distributions to LPs decrease, leading to LPs not being able to invest as much in new funds, which again decreases deal activity for PE. 

Over the last decade, we have seen PE flourishing. Cheap capital and expanding multiples. Pretty much every PE firm has been able to aggressively grow fund size and deliver attractive returns. As capital becomes more restricted, only the strong performers will be able to continue growing / maintaining fund size. Moreover, as the trend of constantly expanding multiples disappears, it will become clear which PE firms can actually deliver returns to their investors. It will become clear which PE firms can efficiently source, transform, and improve assets. It will also become clear which PE firms were just riding the wave of expanding multiples but really don't have much value to add. 

Extreamly busy, working in an energy/natres group

Natural Resources is on fire. Ideal combination of factors.

Is private credit the place to be over the next decade?

In PE - quite busy actually, looking at a lot of take-private opportunities with some late-stage deals personally and some announced by my team this year.

As other commenters put above, this will be an interesting time for PE - the next 3-5 years will show which PE firms were truly disciplined and value-add in their investments (or lucky) and which ones just rode the bull market / tech market and got away for overpaying for assets in an easy money era

My MM ADG group is still doing well. A slight decrease in deal flow, but definitely a decrease in prices buyers are willing to pay.

The alts side of the business has been doing relatively well and picking up steam since early august. Anything to provide value outside of CDs and Treasuries is gonna be worth a look. Expecting a big year or two especially if rates stay the same or higher + the 7 stocks carrying the s&p drop again.

(LMM IB) Definitely fluctuating a lot between extremely busy and have fuck all to do. Nov 22-March was extremely slow, probably hit an avg of 25-30 hours a week over the course of those months. Right now on 4 live sell sides (all from the last 2 months), getting ready to roll out to market next week.

Anyone busy right now is prepping sellsides "getting ready to hit the market"

Come back in 3 to 6 months when you have 1 to 2 bids that deeply offend the sellers.  Trust me...I've seen these CIMs in process right now....the projections and ebitda adjustments are quite...."optimistic" to say the least.

Just because you are busy on a live sellside doesn't mean your bank has great deal flow. Need to close these chit sellsides first.

in TMT at a BB.  

M&A: Mid-caps that were thinking about selling during pandemic highs are now going to market given that 52w average has rerated.  ~80% of juniors in my group are staffed on live sell / buy side mandates. Meaningful uptick in activity since labor day.    

Debt: Dead, except for some amends/extends.

Equity: IPOs starting to come back. A lot of the menial pitch work in the last 12m has been around 'preparing' / benchmarking the IPO pipeline for when IPO market reopens....some recent tech IPO activity is giving our clients more confidence to go to market in the next two quarters. Not a lot of actual mandates yet so could be smoke blown from clients but they seem serious about it.    

Any have comments on RX?

College junior now, already signed for SA24- thoughts on if deal flow will return to a more normal frequency by the time I would potentially hit the desk? (Fall 2025) Or is it too far out to guess?