DeepSummary
In this episode, Scott Becker interviews Rick Kess, a partner at RSM, to discuss trends in the private equity deal landscape. They talk about the surge in deal activity during the past week, which saw around $30 billion worth of deals announced, despite the deal volume for the year still being lower than in 2021.
Rick Kess shares his perspective on the PwC report that highlighted 27,000 companies seeking exits. He believes that the pent-up transaction activity from the past few years, combined with the available dry powder, is pushing people to adjust their expectations on deal prices and make transactions more buyer-friendly.
Kess also discusses the impact of higher interest rates on deal economics and the potential strategies for sellers, such as accepting lower multiples, changing deal structures, or taking on more risk post-transaction. He emphasizes the importance of making assets as efficient and productive as possible to overcome potential price reductions.
Key Episodes Takeaways
- The private equity deal environment has seen a recent surge in activity, with around $30 billion worth of deals announced in the past week.
- However, deal volume for the year is still lower compared to 2021, indicating a lingering impact of market conditions.
- Higher interest rates are posing challenges for deal economics, forcing sellers to adjust their price expectations or consider more buyer-friendly deal structures.
- Sellers are being advised to focus on improving the efficiency and profitability of their assets to offset potential price reductions due to factors like higher interest rates.
- The availability of dry powder and pent-up transaction activity from previous years is driving deal activity, even in the face of market challenges.
- Strategic investors may also play a role in the deal environment, potentially acquiring assets that are on the sale block.
- The number of deals is an important metric for firms like RSM, as it fuels their advisory services for private equity groups and their portfolio companies.
- Overall, the episode highlights the evolving dynamics in the private equity deal landscape and the strategies sellers can employ to navigate the current market conditions successfully.
Top Episodes Quotes
- “I do think because of all those things, we will start to see some transaction volume activity occur, albeit probably not at the prices that some of the sellers were hoping for previously, but yet still hopefully accretive to their overall mission of growing value for their lp's.“ by Rick Kess
- “I do think that pendulum will be forced to change slightly or other things within the deal structure to make it more buyer friendly than perhaps what we would have seen in 2021 or 2022, where interest rates were all, be it relatively close to zero.“ by Rick Kess
- “I do think that's really where our clients are really focused on, is trying to make their assets as attractive as possible on all things that they can control. Obviously, they don't have a whole lot of control in the interest rate environment, but they can control how effective their business is, kind of creating value and revenue growth and those types of things.“ by Rick Kess
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Episode Information
Becker Private Equity & Business Podcast
Scott Becker
7/2/24
In this episode, Scott Becker talks with Richard Kes, Partner at RSM, about recent trends in the private equity deal landscape, including a surge in deal activity and the challenges posed by current interest rates. Richard shares insights on market expectations, strategies for managing asset value, and the impact of the economic environment on deal flow and valuations.