As it turns out, there’s no better lens through which to examine the effects of the current economic environment than US middle market M&A activity. As we heard last week from five top investment bankers, a wide range of indicators – including volume, valuations, financing and sector rotation – flashed across the market in the wake of interest rate hikes, public asset volatility, and economic headwinds.

Before digging into panel’s expectations for this year, let’s reprise 2022 highlights. Global M&A volume was down 35% and 11% by deal count, and in the US 41% and 17%, respectively. Sponsored deal flow was off 33% for both volume and numbers, but ahead of 2020 numbers.

The unraveling of deal momentum began as early as last February. Though market “choppiness” didn’t take hold until the second quarter when “the bottom fell out of the middle market.”...

“This is a really complicated environment to dissect right now.” – John Porter, chief investment officer, Newton Investment Management.

Featuring Charts

Chart of the Week: Ceiling Whacks

January 24, 2023

Past government disputes on debt ceiling limits have sent market volatility soaring.

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Chart of the Week: Rate Expectations

January 17, 2023

Despite the Fed’s hawkish jawboning, market rate expectations show little increase.

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Chart of the Week: Inflation Allocation

January 10, 2023

As prices edge down from mid-2022 highs, shelter and services remain under pressure.

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Chart of the Week: Private Practice

December 20, 2022

Since March the Fed has increased its rate target by 4.25%, the fastest climb ever.

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Chart of the Week: Righty Tighty

December 14, 2022

Since March the Fed has increased its rate target by 4.25%, the fastest climb ever.

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Chart of the Week: Déjà View

December 8, 2022

Leveraged loan all-in yields are seeing levels not present since the GFC.

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Leveraged Loan Insight & Analysis – 1/23/2023

There was 4.1x more MM LBO volume in the direct lending market vs. syndicated market in 2022 With very challenging conditions in the syndicated loan market, more and more sponsors turned to the direct lending market for funds in 2022. Even in the fourth quarter, when direct lending contracted, the ratio of direct to syndicated…

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The Pulse of Private Equity – 1/23/2023

The stalled exit environment Download PitchBook’s Report here. PitchBook’s latest US PE Breakdown, the annual version, showed a seismic decline in PE exits last year. Estimated exit volume fell by 28% while exit value fell a much sharper 63%. In all, PitchBook estimates $322.9 billion in exit value, which is the lowest total since 2013…. Login

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Private Debt Intelligence – 1/23/2023

Private debt dry powder balanced with AUM Private debt dry powder continues to rise in line with the growth of assets under management (AUM) over 2022, although the ratio of dry powder to AUM fell slightly in the first half of 2022. As of June 2022, dry powder at managers based in Europe, North America…

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PDI Picks – 1/23/2023

Rates become chief performance concern Inflation and interest rates enter investors’ list of top three worries this year, as fears of a recession persist. Rising interest rates and inflation have become the key concerns for investors taking part in Private Debt Investor’s LP Perspectives 2023 Study, for the first time pushing extreme market valuations out…

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Leveraged Loan Insight & Analysis – 1/17/2023

US secondary market rallies to begin the year The US secondary loan market has rallied to start the year. The LPC 100 cohort of the largest, most widely quoted loans is up 142bp so far in January to 92.7, and middle market loans are 34bp higher to the 92.8 context. Volatility left a vastly altered…

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Middle Market Deal Terms at a Glance

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