The number of terminated private equity-backed deals fell for the fifth consecutive quarter, indicating that buyers and sellers are increasingly able to come together on price.
Terminated private equity-backed deals were down to four in the third quarter from 19 over the same period in 2023, declining from a recent peak of 30 canceled transactions in the second quarter of 2023.
The asset class follows the trend of declining deal terminations in the broader M&A markets. Withdrawn deals overall in the third quarter dropped 81.3% year over year to 35, the lowest quarterly count since at least 2021.
Private equity firms expect increased deal activity in the second half of 2024 as the Federal Reserve is expected to further reduce interest rates after a 50-basis point cut in September.
Lower interest rates "should be very positive for Blackstone's asset values and provide the foundation for a significant realization cycle over time," Blackstone Inc. CEO Stephen Schwarzman said on the firm's second-quarter earnings call.
The current rate backdrop hampers investment activity as the bid-ask spread between buyers and sellers persists, said Scott Kleinman, co-president of Apollo Global Management Inc.'s Apollo Asset Management Inc. unit, during the firm's second-quarter earnings call.
– Download a spreadsheet with data in this story.
– Read about venture capital funding rounds in the third quarter.
– Explore more private equity coverage.
The third-quarter value of terminated private equity deals totaled $850 million, down from $4.58 billion for the same period in 2023.
Yet the total value of all canceled M&A deals in the third quarter grew year over year to $75.04 billion from $30.54 billion.
In some cases, regulatory issues could be impacting deals.
Biggest withdrawn private equity deals
The biggest terminated deal for the year so far was in July, when New Mountain Capital LLC's bid to buy the remaining shares in healthcare services company R1 RCM Inc. for $5.62 billion was canceled.
R1 RCM instead agreed to be acquired by TowerBrook Capital Partners LP and Clayton Dubilier & Rice LLC at an enterprise value of roughly $8.9 billion, or $14.30 per share in cash.
The New Mountain bid of $13.75 per share in cash apparently undervalued R1 RCM. The Towerbrook deal "represents the best path forward for R1 at an attractive valuation" for stockholders, said R1 CEO Lee Rivas.
In the second largest terminated deal, MNC Capital Partners LP's $3.28 billion offer to buy Vista Outdoor Inc. was rejected by the outdoor recreation product company's board in September, citing undervaluation. MNC's proposal implied an enterprise value of about $1.9 billion and roughly $1.2 billion, respectively, for The Kinetic Group and Revelyst, Vista Outdoor's operating segments.
In September, Vista's board recommended Czechoslovak Group a.s.' offer to buy The Kinetic Group at an enterprise value of $2.15 billion and invest in Revelyst at a valuation of $2 billion.
All four of the withdrawn private equity-backed transactions in the third quarter involved private equity firms as the buyers.
