What are your predictions for 2023?
James Morgan | General Director | Forbes M+A Group
I think in the first quarter only very high quality deals will go to market and you will see a lower level of transaction activity. I think it’s kind of a wait and see in terms of capital markets and banking markets and how constructive that might be to assess. I think there is availability of capital and there is a willingness to transact. The question is what price? People still ask about supply chain issues. People are still asking questions about cost inflation and labor inflation, and until that’s seen, it’s hard to say everything will be perfect at the end of the year.
Mike Bellin | Partner – US IPO Co-Leader | PwC
I think this reset creates opportunities both in Utah and nationally. We’re seeing an abundance of capital out there, and 90 percent of executives say they’ll close a deal as we look ahead to 2023. Looking back, you can’t compare this year to last year or even 2021—those were bubbles in some cases. Going forward, we see this economic uncertainty creating many opportunities from a valuation perspective. In terms of IPOs, we’re seeing a lot of companies right now looking forward to 2023 and starting preparations for that to ensure internal maturity. I think we’re going to see a strong market here in Utah and elsewhere around the country.
Rob McGee | SVP, Structured Finance Group | Zions Bank
I think the conditions we have today will last for some time. I think there are a lot of companies that may have been delayed by the impact of the pandemic, and the supply chain is just now starting to hit some companies. I also think higher borrowing costs will start to force companies that are somewhat strapped—they’ll have less capital available to support R&D and marketing. Growth will come on top of a challenging economy. There will just be less money to deploy to fuel growth. I think all of these things suggest that valuations are likely to stay lower for longer, and that will have an impact on activity going forward for at least the next year.
Spencer Hoole | President | Diversified insurance
We talked a lot about the offer last year. I think demand will slow dramatically. It took the JOBS Act of 2012 to get that IPO market back up and running again. I think M&A will be the way to go. As long as that IPO timeline plays out, M&A will increase at some point for people looking for it as a liquidity opportunity or a business combination opportunity.
Flavia Rydin | VP | Silicon Valley Bank
I think it will be a fire sale for some. That’s a bit pessimistic, but I think some people have had the last two years of the economy dealing with the supply chain, the labor market and inflation. As an operator, if you’ve been building your balance sheet for the last two years and you’ve been quiet on the M&A front, I think there’s going to be a lot of good opportunities to go out and deploy capital and buy assets at a much lower price than you would have in the last two years.
Jack Fecteau | VP | K2 securities
We’ve talked to a lot of tech companies in the last year that are getting 20 calls a week from private equity buyers or doing 10x to 20x market value. A conversation with investment bankers who are currently starting their business is worth 3-5 times more than it is difficult for them to swallow. But how long can you sit idly by when you need to sell this business, given that if you can’t raise additional capital, you’re growing five to ten percent and barely profitable? I think it’s going to take some time for that reality to change for a lot of these guys.
Joshua Little | Member of the Executive Board and Financial Director | Dentons Durham Jones Pinegar
There’s a lot of dry powder, and venture capitalists can’t just sit on it forever. I think a lot of the delay is because people just don’t trust the Federal Reserve System right now. We do not know what they have done or what they will do. Once people understand what the Fed is really going to do and what the future holds, you will see more activity.
Ryan Hemingway | General Director | EPIC Ventures
There is a lack of great deals coming to market. The good ones, as we said before, are those who have already raised capital for the next 12 to 18 months. I’m still seeing good deals: A-plus deals that are still growing at good valuations. I think it seems like the good deals that had to go to market are getting funded. There are a lot of them right now, and this is coming from an early stage guy. I just spoke with a growth-stage fund that said the same thing—they’re witnessing a lot of closings; it’s just not a lot of flow.