GCG’s Q1 2022 Middle Market Update provides an overview of the latest trends in the market, including the recent performance of select sectors and the state of the middle market M&A environment.
Key findings include the following:
- GCG’s proprietary middle market industry sector performance index has taken a turn into negative territory overall in Q1 2022. Contrary to the previous few quarters, no middle market sector outperformed the large cap stocks, as measured by the S&P 500 index. The S&P 500 index had a total 12-month return of 12.7% as of March 2022. This significantly outgained the middle market index which returned (30.5)% for the 12-month period.
- Industrials and Manufacturing led the middle market over the past 12 months with a 3.9% return, while the Healthcare sector was the worst performing sector with a negative 54.9% return during the same period. Most middle market industries have had a negative return over the past 12 months.
- Middle market public and private company transaction deal value and volume for Q1 2022 decreased from Q4 of 2021 and was the lowest quarter since Q1 of 2021. Compared to Q4, values and volume decreased 27.3% and 27.7%, respectively. Q1 2022 value and volume grew 3.0% and 5.9%, respectively over Q1 2021.
- Covid and uncertainty around tax law changes impacted 2020 and subsequently 2021 activity. 2021 Q2 through Q4 activity was significantly higher than prior quarters and broke M&A deal volume records for a given year. The 4th quarter, in particular, eclipsed the rest of 2021 by deal count as year-end deal closings surged. It was to be expected that Q1 2022 would decline off of this torrid pace.
- During Q1 2022, the M&A environment was still very strong. Interest rates were rising but still not prohibitive. Capital availability was still quite high and the economy was strong. The middle market M&A market remains quite robust.
Click here for the full update.