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December M&A Roundup: A Comprehensive Look at the Year-End Deals

As we bid farewell to 2023, the merger and acquisition landscape witnessed significant movements in the closing month of the year. From notable trends to standout deals, December proved to be a captivating chapter in the world of M&A. In this roundup, we delve into the insights provided by key sources to dissect the mergers, acquisitions, and overarching trends that defined the final month of 2023.

Reflecting on 2023 and Charting the Future

The Wall Street Journal's contribution is marked by a comprehensive overview presented through five insightful charts. In 2023, M&A faced a challenging landscape, marked by a decade-low of $3 trillion and a 20% decline from 2022. Venture capital and private equity firms saw substantial drops of 39% and 35%, while strategic deals experienced a 14% decrease. The pivotal challenge was the significant misalignment of price expectations between buyers and sellers, with strategic deal multiples hitting a 15-year low at 9.8 times, fueling disagreements over pricing. Public market valuations outpaced deal multiples, complicating negotiations. Private equity firms adapted strategies, making smaller stake investments and acquiring partial stakes. Despite costly financing, an improved earnings outlook in Q3 suggests a potential M&A rebound in 2024, especially with the Federal Reserve signaling interest-rate cuts.

QXO and More: December's M&A Power Moves

December saw robust activity in distribution mergers and acquisitions, defying the usual year-end quietude. MDM reported a notable surge with 34 M&A news items involving distributors of industrial, commercial, and building supply products, along with manufacturers operating within the same channel. The tally encapsulates 40 transactions, with some involving multiple companies.

An equally substantial December M&A development involved entrepreneur Brad Jacobs, known for his role in founding major entities like XPO and United Rentals. Jacobs announced the formation of QXO, a major building products distributor, anticipating a revenue run-rate surpassing $1 billion within its first year, with plans for rapid scaling.

Mismatched Values: The Toll of Rising Interest Rates

According to the analysis from WhatTheyThink, in 2023, global M&A activity witnessed a 20% decline compared to 2022, with private equity deals plummeting by 35%. The culprit behind this downturn was identified as higher interest rates, making financing more expensive and causing a mismatch in perceived enterprise values between buyers and sellers. The decline in M&A deals closely mirrored the global trend, dropping by 14.3% from 2022. Several industry-specific trends emerged during the year-end, including the end of post-Covid demand, supply chain equilibrium, and an increase in financial challenges leading to bankruptcies and closures. The report emphasizes the impact of pent-up demand saturation, normalized supply chains, and financial struggles on the industry's M&A landscape. As 2023 concluded, a notable reset of expectations for 2024 is predicted, highlighting a timeless dynamic where sellers perceive higher values while buyers maintain a disciplined approach to valuation. Despite a slower market, 85.7% of owners completed transactions, emphasizing the continued readiness of many to exit ownership.

Highlighted Deals in December

Japan’s Nippon Steel Corporation (NSC) is set to acquire United States Steel Corporation (U. S. Steel) in an all-cash deal at $55.00 per share, totaling an equity value of around $14.1 billion, plus assumed debt, reaching a total enterprise value of $14.9 billion. The purchase price offers a 40% premium to U. S. Steel’s closing stock on December 15, 2023. The acquisition will enhance NSC's global manufacturing and technology capabilities, expanding its reach in the United States and pushing NSC closer to its strategic goal of achieving 100 million tonnes of global crude steel capacity annually. The transaction has received unanimous approval from both companies' Boards of Directors.

AbbVie Inc. is set to acquire ImmunoGen, Inc. in a deal valued at $10.1 billion, accelerating AbbVie's entry into the commercial market for platinum-resistant ovarian cancer. ImmunoGen's flagship therapy, ELAHERE® (mirvetuximab soravtansine-gynx), a first-in-class antibody-drug conjugate (ADC), is approved for platinum-resistant ovarian cancer, and the acquisition expands AbbVie's presence in the solid tumor space. The transaction, at $31.26 per share in cash, emphasizes AbbVie's commitment to diversifying its oncology pipeline across solid tumors and hematologic malignancies. The deal is expected to close in mid-2024, subject to shareholder and regulatory approvals. The collaboration positions AbbVie to transform cancer care standards.

Formstack, a PSG and Silversmith-backed SaaS company, has acquired Chicago-based forms provider Formsite, enhancing Formstack's leadership in the data capture and forms market. Formstack's mission to empower users with practical solutions aligns with the acquisition, expanding its capabilities to include document management, electronic signatures, and visual workflow automation. The move allows Formstack to provide over 20,000 organizations, including Advent Health and Netflix, with an end-to-end workflow automation suite. Formsite customers will now access Formstack's advanced capabilities, broadening the audience reach and strengthening Formstack's market position, meeting evolving business needs effectively.

DeepSeas has acquired GreyCastle Security, marking its third strategic acquisition in the last year and solidifying its position as a leading Managed Detection & Response (MDR) provider. Recognized by Gartner among the top 40 MDR providers, DeepSeas emphasizes its commitment to providing clients with comprehensive managed, professional, and advisory services. The acquisition enhances DeepSeas' framework, particularly in audit readiness, CISO advisory, and Incident Response (IR) preparedness. DeepSeas plans to expand GreyCastle Security's audit readiness service to include Cybersecurity Maturity Model Certification (CMMC) readiness and NIST-based cyber assessments, catering to the underserved midmarket with compliance advisory services. The acquisition will further optimize costs and outcomes for GreyCastle Security's clients, integrating its penetration testing service into DeepSeas' comprehensive Cyber Defense Platform. Chris Esemplare, CEO of DeepSeas, sees the acquisition as a crucial step in supporting the company's strategic growth plans.

The December M&A Roundup for 2023 presents a multifaceted perspective on the dynamic landscape that marked the end of the year. From peaks and strategic considerations provided by WhatTheyThink, The Wall Street Journal, and MDM, each source contributes unique facets to our understanding. As businesses navigate the complexities of the ever-evolving M&A landscape in the coming months, these insights serve as valuable signposts, guiding strategic decisions and shaping the future of mergers and acquisitions.

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