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PE firms struggle for liquidity amidst extended M&A decline

The global M&A market’s significant downturn in Q3, with multiple factors contributing to the decline in deal value, spurred a continuing search for liquidity among PE firms.

Extended interest rate uncertainty and limited access to debt, combined with geopolitical turmoil, pushed M&A expectations further down. While the number of deals remained relatively stable, the total deal value dropped to a decade-low point.

Private equity firms struggled to access debt, causing a shift in the market share from financial sponsors to corporate buyers. The median debt-to-enterprise value ratio also decreased, making debt a smaller part of leveraged buyouts.

Higher interest coverage ratios have stopped banks from lending as much for leveraged buyouts.

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