LUTZ BUSINESS INSIGHTS
Quarter Three Middle Market M&A Report 2020
The lower middle market deals in Q3-2020 rebounded from the steep decline realized in Q2 when the spread of COVID-19 triggered global lockdowns and brought businesses to a standstill. The critical phase of uncertainty seems to be over, resulting in increased willingness to engage in transactions. The total value of lower middle market deals (transaction value less than $1 billion) announced in Q3 was $74.3 billion – 213.2% above Q2. Transaction volume also increased 18.0% q/q to 2,761, but was still down 12.0% y/y.
While not reflective of a full recovery, the uptick in M&A activity in Q3 highlights the sellers and buyers’ renewed interest for deal-making. Corporations and financial sponsors turned back to the M&A market mid-summer to either revisit deals left on hold at the height of the coronavirus pandemic or to pursue new opportunities mostly focused on COVID resilient sectors such as technology, industrial services or healthcare. Additionally, value investors sought to capitalize on distressed M&A and drive post-COVID-19 growth.
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