The M&A gears are turning again… slowly

Driving the news: Two big deals in the last two weeks — on July 19, private equity firm TPG bought Nextech for $1.4 billion last week, and on July 13 Exxon bought Denbury Resources for $4.9 billion.

What’s happening: Dealmaking has been strangled by pricey, tight debt markets, but banks are lending again, and dealmakers are hanging their hats on a more active 2024.

• John Zito, a partner at Apollo Global Management, says financing is flowing faster as banks start to see buyers for hung loans stuck on balance sheets from previous deals.
• “The financing market in the past four, six, eight-ish weeks seems to have opened up, with banks more willing to lend,” Cleary Gottlieb partner James Langston says.
• “Right now, there’s a lot of stripping parts and not whole assets being sold off — but there are fire sales coming,” Jon Swope, Leerink senior managing director and head of digital health, tells Health Tech Deals’ Aaron Weitzman.
• Cathay Capital partner André Puong tells Axios he’s “actually seen an uptick in the number of books in the past two months,” but notes an increased frequency of minority stake deals.

What they’re saying: “We see the tide shifting a little bit,” says Chris Pedone, a managing director in Houlihan Lokey’s fintech group.

• Over the last year, sponsors have been reluctant to put their portfolio companies on the block for fear of a low valuation, Pedone says. “But what they’re finding in the market is, for them to raise new money from LPs, they need exits,” he adds. “So there’s a bit of a push-and-pull.”
• “On the sell side… it’s like a traffic jam of assets that have been lining up to transact,” Moelis managing director Georgi Balinov says.

Yes, but: While signs of life are evident, don’t expect a deal flood in the fourth quarter, says Matthew Tingler, Baird’s managing director in consumer and retail.

• “To get deals done by the year-end, you really need to be in the market by Labor Day,” Tingler says. “I just don’t see a lot of kind of new deals coming to market based on conversations with the private equity community.”

Read the full article by Claire Rychlewski in Axios here: The M&A gears are turning again… slowly