Insights and Observations from the Northwest Middle Market Growth Conference

I recently had the opportunity to attend Seattle ACG’s annual “Northwest Middle Market Growth Conference.” The conference is always a highlight of the year for Seattle’s M&A ecosystem. Local and national private equity groups, investment bankers, and M&A service providers get together to talk deal flow and the overall M&A market. Perfect, sunny PNW weather (and no wildfire smoke) provided a great environment for networking and relationship building. Here are a few key insights and observations –

Deal flow isn’t dead

Overall volume and deal size have declined year over year; however, the market isn’t completely dried up. Smaller platforms and add-on acquisitions with enterprise values less than $100 million appear to still be moving forward at a solid pace.

I felt a general sense of optimism moving forward. Interest rates hikes are leveling off, and there doesn’t seem to be a major recession looming at the moment. Middle market businesses are still growing and hiring. We may see an increase in M&A activity towards the end of 2023 and into 2024.

Longer deal timelines

Deals are still taking longer to close in the current environment. Deeper diligence, more quality of earnings roll forwards, more re-trading. Deals are still getting done but be prepared for a longer time horizon if you’re planning to move forward with a transaction.

The Pacific Northwest M&A ecosystem continues to evolve

When I first moved to the PNW nine years ago, there were only a handful of private equity groups, family offices, and independent sponsors. Seattle was never talked about as a private equity/M&A hub; however, each year, we seem to add a new PE group or independent sponsor. This combined with a number of strong investment banks, high quality service providers, and a target rich environment of middle market businesses, has created a strong M&A ecosystem. Our pool of middle market companies has also caught the attention of capital allocators outside of the PNW, as according to Pitchbook, the amount of capital coming from outside our region has continued to increase over the last number of years, even with an increase in the level of local capital availability. Tech gets the national headlines when it comes to Seattle; however, manufacturing, construction, business services, and food/ag are still key drivers of this economy. These businesses are prime private equity targets.

The future looks bright for the PNW M&A ecosystem. I’m proud to be part of this great community and look forward to being part of its continued evolution. Thank you to ACG Seattle and its conference committee for another great event!