The SMB M&A Pipeline: Q3 2023

Welcome to the third issue of The SMB M&A Pipeline, a quarterly publication from Axial. The series surfaces a top-of-the-funnel breakdown of the deal activity occurring on Axial’s platform. The aggregated metrics include quarterly deal volumes, financial and geographic characteristics, and pursuit rates, sorted by quarter and also by industry category.

All deal data is fully anonymized to protect the confidentiality of these transactions.

Pursuit Rates

“Pursuit rate” measures the rate at which Axial’s buyside members register interest in a deal that an Axial sell-side member has invited them to consider. If NDAs, IOIs, and LOIs reflect the deepening progression of interest among acquirers on a given deal, the pursuit rate is one step higher in the funnel than the signed NDA. It offers insight into the forward deal pipeline and the initial interest level of prospective Axial buyside members.

An Overview of Q3 2023

We saw 2,360 deals come to market in Q3, 11.78% lower compared to the same time period last year. Food & Hospitality was the only sector to see positive YoY deal flow (see table below). This is the third consecutive quarter of increased deal flow for Food & Hospitality, which saw YoY increases of 74.31% and 23.39% in Q1 and Q2, respectively. Consumer Goods, on the other hand, had the highest YoY deal flow decrease.

Deal Volume vs. Pursuit Rate

Even with consistent quarterly deal volume increases, Food & Hospitality ranked in the bottom (7th) for pursuit rate. Business Services also had a significant discrepancy, ranking 7th in deal volume, but 2nd in pursuit rate. Despite a 15.35% YoY deal flow decrease, Industrials ranked in the top 3 for both categories.

Below are a set of industry-specific and overall deal activity tearsheets that lay out a complete breakdown of deal activity in Q3 on Axial. Feel free to share and incorporate the data into your materials as you see fit.