The M&A market rebounded, sort of, in the second quarter of 2023, rising to 110 publicly announced transactions, compared with 99 in the first quarter. Considering the economic shock of fast-rising interest rates, and how many deals died in all stages of the transaction pipeline last fall, the volume was actually impressive. Most of the dealmakers we talk to say that their pipelines are healthy, albeit moving slower and with more difficulty than before. We are still way down from the 147 transactions recorded in the second quarter of 2022, which annualized would have resulted in nearly 600 deals for the year. But a lot has changed in a year, clearly.
We are missing the larger portfolio deals, particularly within the seniors housing sector, because buyers aren’t willing to put up the equity or borrow expensive debt on big deals, and because sellers are mostly looking to divest one or two properties at a time, as needed, since they won’t get their desired exit value. It is hard to see these market dynamics change much for the rest of the year, with the Fed hinting at another interest rate hike, or two. In the meantime, sellers will still strategically divest, well capitalized buyers will look for opportunistic acquisitions, brokers will remain busy, and operators can continue their marches back towards stabilization. If they’re successful, then we’ll see what values their communities will command when the capital markets shift in their favor.
