The market continued to grapple with a "higher for longer" interest rate narrative in the third quarter of 2023, as structural factors such as fading deflationary pressures from outsourcing and the green transition suggested elevated rates could persist longer than many anticipated. M&A activity cooled for a second consecutive quarter, with buyers and sellers gravitating toward smaller deals amid higher financing costs, reduced lending, and a widening gap between buyer and seller valuation expectations. Despite a widening of cap rates, an attractive value arbitrage between business and real estate multiples remained intact, keeping sale leaseback opportunities compelling across a range of middle-market sectors.
