Home Private Equity Why private equity is ‘the real issue’ in M&A

Why private equity is ‘the real issue’ in M&A


The mergers and acquisition (M&A) landscape has seen significant activity in 2024, with major deals like ConocoPhillips’ (COP) announcing its plans to acquire Marathon Oil (MRO) and Capital One’s (COF) intent to purchase Discover (DFS) making headlines. To gain insight into whether this trend can continue, Solomon Partners CEO Marc Cooper shares his outlook on dealmaking for the remainder of 2024.

Cooper characterizes the current M&A environment as “a tale of two cities.” On one hand, he notes that “strategic M&A is doing great,” with companies continuing to engage in “noteworthy transactions” aimed at creating increased value. However, Cooper points out, “the real issue is private equity.” He explains that this segment of the market has not yet reached “that equilibrium point” between buyers’ and sellers’ expectations.

“There are an unprecedented number of assets owned by private equity that are slated for sale, but are not getting done because of price discrepancy. It’s really going to be an issue of just accepting what the new price reality is,” Cooper told Yahoo Finance.

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This post was written by Angel Smith

Video Transcript

It’s been a big headline year for M and A activity including capital one, acquiring discovery, large energy acquisitions, involving Exxonmobil and Cano Phillips.

And of course, that ever evolving and seemingly never ending Paramount Saga.

So what should we expect ma to look like coming into the second half of 2024.

Joining us now to discuss, we’ve got Mark Cooper Salmon partner, CEO Mark, thanks for being here.

It’s always great to speak with you.

I want to start on just what you’re seeing, your team sent over some data on the increased value over all of the deals that you’re seeing, but that the number of deals has decreased.

What do you think is driving that bifurcation private?

Well, pleasure to be here and thank you for having me, but it’s all about private equity.

A little bit of the um tale of two cities.

Uh Strategic M and A is uh is doing great.

Uh I think it’s up 35% a year over year and a lot of noteworthy transactions.

In fact, you probably saw we just announced uh advising S A from the acquisition of uh Neiman Marcus.

So a lot of noteworthy transactions, a lot of optimism in the boardroom, uh a lot of reasons to be employing M and A as a tool for growth and uh for value creation, the real issue is private equity uh And private equity has yet to come to that um uh that equilibrium point where buyers and sellers expectations meet.

Um And it’s a particularly long time uh since the run up in interest rates that uh it’s not gotten to that equilibrium point.

That’s unusual.

But then again, we’ve been through some pretty unusual times over the past three years, given the pandemic, given the excess capital in the marketplace, given zero interest rates and then a 500 basis points or 525 basis point increase in interest rates.

And it’s just taking time to uh to work through the system mark.

I’m just curious, your thoughts is private equity in a bubble right now.

That’s about to pop.

Given what you just said.

Well, I always think about bubble as people who’ve been overinvested in assets and, you know, now they’re going to be uh uh they uh it, it’s gonna pop, but in this case, it’s more of a, it’s more of a cork coming out of a bottle if you will.

So, uh there are an unprecedented number of assets owned by private equity that are slated for sale, but don’t uh but are not getting done because of price discrepancy.

It’s really gonna be an issue just of accepting what the new price reality is.

What will that mean to private equity?

Uh Well, it means the vintage of that, those funds will probably not as good as prior vintages.

Um which has happened before.

Uh I don’t think it’s about distress.

I don’t think it’s about them having to go through uh, recapitalizations and transactions that will wipe out their equity.

It just means lower returns.

But once in fact, they get through that uh divestiture sequence, uh it’ll just open up uh all the their ability to deploy the excess capital they do have, which is still an unprecedented amount I heard on the order of $1.2 trillion that’s out there to invest, which they can’t do until they clean out the system if you will.

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