Buyer caution emerged at the start of the second quarter of 2022 and persisted into the third, as many buyers struggled to lock in debt financing, which in turn made pricing assets appropriately more challenging amid rising interest rates, inflation, and an overall risk off environment. Middle market M&A activity pulled back as well, weighed down by geopolitical conflicts, inflation, and pandemic related supply chain issues, with average leverage multiples ticking down slightly amid higher borrowing costs and more conservative lender views. Even so, sale leaseback multiples remained attractive relative to general middle market valuations, preserving a healthy arbitrage between business and real estate multiples, and pitch activity, a leading indicator for future dealmaking, remained strong heading into the following quarters.
