M&A search volume grows despite market concerns

by Diane DeRosa-Fedor 

As the economy continues to show indications of a potential recession, we often get asked by candidates and clients about our search volume, and if the current climate is leading to a downturn in the number of searches we are starting. The answer so far ... is no. 

Last year, the Charles Aris Corporate Development Practice wrote and closed over 50 searches for private equity portfolio companies, making for an average of just over four a month. But in the first four months of 2022, that number increased to over 30, which brings the average up to over seven searches a month. And, in the first two weeks of May alone, we’ve already begun six new searches.

So, at least for now, the number of searches we’re taking on is not only staying put but is trending upward. Why might this be the case? Here are three potential factors that we think are causing this uptick:
  • More private equity firms are hiring corporate talent than ever before in the industry. And while it’s not infeasible to think that some portfolio companies have held off on these hires due to the current uncertainty, the amount of firms now prioritizing these kinds of hires has far covered any deficits (and then some).
  • Uncertain economic conditions are not always indicative of less M&A activity. Certain industries will actually see significant uptick in deal flow during more challenging economic times, as valuations (which have been historically high) come back down to earth.
  • The urgent nature of private equity. Unlike public companies, who can afford to take a decades-long outlook and “sit out” a few quarters, private equity firms operate under a more urgent lifespan. In other words, they can’t afford to wait for the waters to calm, and often must continue to push through and prioritize their central thesis of M&A.