Testing… Testing… Is Anyone There? – Deal Activity Slows Dramatically as Investors Look to 2023 for Clarity on Economic Outlook

Historically, annual M&A activity peaks at year-end as buyers and sellers rush to close before the end of the tax year. However, in 2022, the market took an extended intermission late in the year as deal volumes compressed and investment bankers took (and enjoyed!) vacations over the holidays for the first time in a decade. Investor hesitancy was particularly centered on “consumer discretionary” companies as concerns over the demand outlook, sustained inflation, and the cumulative impact of higher rates cast doubts on company projections, leading to valuation gaps between buyers and sellers. While some transactions withstood repricings and made it to the finish line, many went on hold or were kicked to 2023 in anticipation of more clarity and / or improvement in the economic outlook.

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Despite these market pressures, deal activity continued as strategic buyers enhanced their market share or capabilities with strategic acquisitions during the second half of 2022. AVI-SPL, a provider of professional audio and communications technologies backed by private equity firm Marlin Equity, continued its acquisition streak with the announced purchase of Multimedia, an integrator of audio / visual and IT equipment, to expand its foothold in Latin America. Sennheiser acquired Merging Technologies, a developer of digital audio workstations and other recording solutions. Most notably for Intrepid, in October, electronic instrument and technology leader Roland Corporation (TSE: 7944) acquired our client Drum Workshop, the leader in acoustic percussion, in a landmark sale that is expected to transform the industry and player experience as we know it.

As we look to 2023, keeping a tight pulse on the market and understanding key drivers and detractors of value are more pertinent than ever. If you are interested in learning more about what’s happening in consumer electronics, music products, professional A/V, residential technology, or commercial technology, or about potential M&A or capital raising options for your business, please do not hesitate to reach out.
Also, if you happen to be attending The NAMM Show in April, please join us for the inaugural Capital Summit panel session where we will engage in a dialogue with notable industry leaders. More information can be found here.

Thanks for reading!