MARKET UPDATE

Twenty-seven M&A transactions closed last month, the lowest in 10 years. In 2022, M&A activity was down 34.8% versus 2021. Capital levels in North America decreased by 10% from November to $2.0 trillion (USD) of cash on corporate balance sheets. There was approximately $1.96 trillion (USD) of private equity dry powder. Rising cost of capital has depressed public equity valuations and continues to slow M&A deal volume.

VALITAS INSIGHTS

Using Debt to Fuel Value Creation. It is uncommon for a business to be opportunity constrained. Often, the issue is not having high-return projects to invest in but choosing which to fund. This is a capital-constrained situation. Equally important is choosing how to fund those projects. The cheapest and most expedient option would be to use cash on hand, but this limits the possible pace of investments. When you have more opportunities than capital, do you forgo quality opportunities, raise equity, or arrange for more debt?