A recent survey indicates that two-thirds of middle market deals today include a sell-side market study in the deal room. The dramatic rise in Middle Market M&A’s usage of third-party sell-side market studies is intriguing.
For now, here is what we know:
Approximately 10 percent of middle market deals today utilize a third-party sell-side market study on every deal (or at least that would be the case if we accept that the proportion of respondents in this survey who claimed they use a sell-side market study “on every deal” is representative of the entire middle market).
Another forty-seven percent of respondents indicate that “most” deals include a sell-side market study.
Roughly forty percent of survey respondents stated that “some” (42 percent of responses) or “no” (zero responses) deals involve a sell-side market study.
All of the “on every deal” responses and two-thirds of the “in most deals” responses came from investment bankers.
Since Investment Bank responses are the most credible here, given their decision-making and advocacy roles, we assume their perspectives would indicate even more deals in the future will include sell-side studies.
PE investors and managers who responded may not yet have been sold on the concept by their investment bankers.
The survey was not scientific, nor broadly distributed: It took place in March and April of 2022 as a LinkedIn poll.
There were a total of twenty-one respondents, two of which were removed as they were taken by non-M&A-industry participants.
Nine respondents were I-Bankers; five were PE investors and five were either company executives or advisors (consultants).
Nevertheless, there does seem to be enough data from reliable sources to conclude that sellers in the middle market would be advised to include a credible third-party sell-side market study to help allay bidder concerns and to speed their diligence processes.
It is reasonable to assume that buyers are beginning to expect to find the sell-side market study in the data room.
