OOH …Here’s One Thing

In the Air Tonight

 

by Jim Johnsen,
Managing Director,  Johnsen, Fretty & Company

 

 

 

If you have never seen this before, it’s worth the first 7 minutes or so.  IMHO might be one of the best concert openings…ever.

Speaking of “in the air”, I have a good friend and a compatriot who investment banks the consumer sector.   He was kind enough to send me his third quarter report on the deal business in consumer goods.  Guessing that most of you do not follow deals in the consumer goods space (even though they are a large advertising category for us), I thought it might be helpful to give you a couple quick facts about the deal business in 2023 and to reverberate the larger world at large (…yes I know…but just a play on words):

1. Global M&A activity declined in Q3 2023 approximately 3% on a YoY basis from $$738.1 billion (Q3 2022) to $719.0 billion (Q3 2023). These relatively “flat” YOY results bode well, in our opinion. Last quarter, the actual “volume” of deals completed were reported being up and we can now also say the deal “values” are following at only slightly down to neutral. This normalization of deal metrics makes sense given the Fed has paused additional rate hikes since July. It is no coincidence that when the Fed quiets its activity both buyers and sellers alike have an easier time establishing a equilibrium of expectations around valuation metrics and the attendant cost of debt.  JJ take – sounds like the world at large is experiencing some valuation downdrafts.
2. Given that we are approximately 12 months away from the next U.S. Presidential election and the Fed seems close to the end of its hawkish rate rises, we anticipate an acceleration in dealmaking activity over the next 9 months.  JJ take – amen…and I agree…presidential elections are generally very good.
3. Through Q3, US Venture Capital firms completed approximately 11,935 deals with a cumulative value of $125.9 billion, representing a .05% increase in dealmaking and 35% decline in deal value vs 2022’s figures (11,871 deals totaling $194.9 billion). US VC fundraising also declined 72% by the end of Q3 vs year ago ($42.7B raised across 344 funds vs. $150.9 billion raised across 593 funds).   JJ take – wow, VC is not having fun at the moment.  
4. Year-to-date, US PE dealmakers completed approximately 6,162 deals with a cumulative value of $611.6 billion, representing a 6% decrease in deal count and a 25% decrease in deal value compared to 2022’s figures (6,530 deals totaling $819.2 billion).Similarly, US PE fundraising declined 6% YoY totaling $242.0 billion raised across 258 funds vs. $258.8 billion raised across 296 funds. During Q3, the number of sponsors exiting US PE-backed companies totaled 275, representing approximately 18% YoY decrease in exit count, with a cumulative exit value of $44.1 billion representing an 50% value decrease vs Q2 2022’s figures (337 companies valued at $89.0 billion).   JJ take – PE is also having its challenges in 2023
5. North America M&A deal value ($375.0B) was relatively flat from Q2 2023 ($377.1B) but up 46% YoY (Q3 2022 $255.9B). Noteworthy deals included the $21.0 billion acquisition of World Wrestling Entertainment (NYS:WWE) by Endeavor (NYS:EDR) , the acquisition of Black Knight (NAS:BKI) by Intercontinental Exchange (NYS:ICE) for $13.1 billion and the acquisition of Life Storage (NYS:LSI) by Extra Space Storage (NYS:EXR) for 12.7 billion.  JJ take – Not sure the outdoor business is tracking the world at large, but hey, someone should give endeavor a call as there could be a supersized ad buy in there somewhere, and the combo of Life Storage and Extra Space Storage should shake things up from a landlord perspective.
6. Going forward into Q4 2023, as M&A valuations find a new normal, Tully & Holland expects to see a continued acceleration of transaction volumes in the M&A sector.  JJ take – ehem, valuation expectations in the outdoor business are a little “stickier” and as such “acceleration” may take a little longer to play out.

That’s it for this week folks.  If you would like to read the entire report, you may find it here:
Consumer Quarterly Report (constantcontact.com)

And one quote for the road:

 

 

 

 

 

 

 

 

 

 

 

 

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Securities transacted through StillPoint Capital Member firm FINRA/SiPC