M&A dealmakers have experienced a bumpy ride. Following the post-pandemic boom of deal volume in 2021, the market in subsequent years witnessed an unfortunate decline. Needless to say, the M&A landscape has offered something of a “masterclass” in volatility. There are a handful of factors that have played into the reduction of activity over the past few years, but other positive aspects including dry powder abundance and easing macroeconomic conditions suggest a potential market recovery.
Despite sounding repetitive, it’s worth noting that the current amount of dry powder (committed capital that private equity firms have available for deployment) remains near record highs due to high fundraising and low deployment in recent months. Amid unfavorable interest rates and greater levels of regulatory scrutiny, including a noticeable uptick in the enforcement of antitrust laws, private equity deals have been suppressed in recent years, prompting many firms to focus more on smaller add-on acquisitions. As interest rates continue to sit above desired levels, buyers will endure less potential return and more risk of default on specific investments. An easing lending environment, among other economic factors, will presumably drive larger platform deals, further stimulating deal value and volume.
Other dealmaking factors including potential interest rate cuts and easing inflation, are also encouraging signs that deal volume will pick up during 2024. The pent-up deal demand from private equity investors who have been sitting on the sidelines over the past 12 to 24 months is likely to spur M&A activity for the remainder of the year.
With all of the aforementioned topics influencing the market today, it can be expected that overall deal volume and value will increase throughout 2024 and beyond.
M&A Market Activity
U.S. deal volume increased by approximately 2.5 percent in May 2024 as compared to the prior month, while YTD volume decreased by approximately 16 percent as compared to the prior year. During this market rebound, the low levels of M&A activity have increased the demand of both private equity and strategic acquirers hungry to deploy capital.
The Pittsburgh M&A market deal volume increased by approximately 63 percent in May of 2024 as compared to the prior month with several noteworthy transactions completed by both strategic acquirers and private equity firms. Sightpath Medical, TruFood Manufacturing, Unified Door and Hardware Group, and Level Interactive all completed strategic acquisitions, while companies like Encotech saw a successful exit in the industrial space.
Deal of the Month
The deal of the month for May 2024 in Pittsburgh is TruFood Manufacturing’s acquisition of Bar Bakers, a privately held manufacturer of branded nutrition and protein bars. Bar Bakers specializes in gourmet cookies, wafer cookies, cold processed nutritional bars, and baked nutritional bars, among other bars and cookies. The addition of Bar Bakers complements TruFood Manufacturing’s extensive offering of private-label nutrition bars, protein bars, chocolate molded products, and other baked goods.
“The coming together of TruFood and Bar Bakers marks a significant milestone as it strengthens our position in the nutritional snacks market. As a result, we have expanded our capabilities and portfolio of products and strategically extended our manufacturing footprint to the West Coast,” stated Michael Buick, CEO of TruFood Manufacturing.
Sources: Company websites, PitchBook, and S&P Capital IQ
Jake Peebles is an Analyst with MelCap Partners, LLC, a middle-market investment banking advisory firm. For more information on MelCap Partners, please visit www.melcap.com or email [email protected].
