Financial sponsors can come in various forms — Traditional Funded Private Equity, Independent Sponsors, Family Offices, and Search Funds, among others. Over the past several years, we have noticed several nuances with respect to financial sponsor activity in the M&A marketplace. U.S. private equity fundraising has surpassed $370 billion in each of the last three years (2021 – 2023); U.S. private equity exits have decreased at a compounded annual growth rate of ~30 percent since 2021; and average U.S. disclosed deal value surpassed $400 million for the first time ever in both 2022 and 2023.

One other major factor that plays into this paradigm are interest rates. As recent as the first quarter of 2022, in an effort to encourage consumer spend, the Federal Reserve maintained a Federal Funds Interest Rate near zero. Since then, the Fed has steadily increased interest rates to more than 5 percent, making the cost of debt considerably more expensive.

Given that most financial sponsors place modest leverage in the form of debt in any deal, rising interest rates has made it more expensive to fund a transaction. This would, in part, explain the recent decrease in private equity exits.

Depending upon the length of its hold period, a financial sponsor can be more strategic in the timing of an exit, relative to a family/founder-owned business where the owner is nearing retirement age. Over the past 18+ months, many financial sponsors have made the decision to wait for interest rates to fall before pursuing an exit. Deal value has increased because of a “flight to quality.” Given the cost of debt, acquirers are being much more selective in the transactions they pursue, which has resulted in strong valuations for high-quality businesses, particularly in competitive processes.

It is generally expected that in 2024 interest rates should decline modestly, which will result in an increase in private equity exits. Furthermore, because of the record levels of uninvested capital from record levels of fundraising by private equity groups over the past three years, financial sponsors are expected to be more aggressive and active on the buy side in 2024.

M&A market activity

U.S. deal volume declined by approximately 8 percent in February 2024 as compared to February 2023. Transaction value remains near historical highs as private equity firms and strategic acquirers are well-positioned to pay premiums for high-quality assets. 

The Northeast Ohio M&A market experienced a modest flattening of deal volume in February 2024, which was to be expected, as there is usually an uptick in transactions in January (relative to February) primarily from year-end closings getting pushed. February 2024, however, saw several noteworthy transactions. Park-Ohio Holdings Corp., Blue Point Capital Partners, Society Brands and The Goodyear Tire & Rubber Co. all took part in an M&A transaction during February as businesses continue to look to inorganic initiatives to fuel incremental growth.

Deal of the Month

In February, Clayton, Dubilier, & Rice acquired Massillon’s Shearer’s Foods from Ontario Teachers’ Pension Plan. Shearer’s Foods is a contract manufacturer and private label supplier in the North America snack industry.

Shearer's Foods has 17 state-of-the-art, geographically diverse manufacturing facilities in Ohio, Texas, Arkansas, Arizona, Florida, Minnesota, Pennsylvania, Virginia, Iowa, Ontario and Alberta, including one of the industry's first Leadership in Energy and Environmental Design platinum LEED certified facilities in Massillon. CD&R’s acquisition of Shearer’s Foods marks the fifth time that it has been acquired by a private equity firm since 2005. 

“We are confident that CD&R’s experience, expertise and resources will strengthen our team and advance our mission to make Shearer’s the manufacturer and supplier of choice for our growing customer and retailer communities,” says Bill Nictakis, executive chairman of Shearer’s. “We are grateful for the support we have received from Ontario Teachers that has helped us execute our strategy and solidify our position.”


Anthony Melchiorre is a vice president with MelCap Partners LLC, a middle-market investment banking advisory firm. For more information on MelCap Partners, please visit or email [email protected].

Sources: Company websites, Forbes, Morgan Stanley PitchBook, and S&P Capital IQ