Investment Bankers Examine M&A Market Status

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A recent report from Capstone Partners’ Consumer Investment Banking Group found activity among mergers and acquisitions in the camping and hiking industries to be down from 2022 levels. However, high-quality privately owned companies are still receiving premium multiples in sales.

The Outdoor Recreation & Enthusiasts report said economic headwinds have challenged dealmaking, with buyers and sellers approaching acquisitions and sales with increased caution.

The report listed Camping World among its camping and hiking segment participants. Although the report found dealmaking activity challenged in 2023, sector players with efficient inventory management, strong gross margins and revenue visibility have continued to attract buyer and investor appetite.

The average EBITDA (earnings before income, taxes, depreciation and amortization) and multiple in Capstone’s camping and hiking index improved this year from 2022 levels. The report found index companies valued at 12.7 times the company’s enterprise multiple. The enterprise multiple is the enterprise value (market capitalization plus total debt minus cash and cash equivalents) divided by EBITDA. Last year, the index’s companies were valued at 11.8 times the enterprise multiple.

Another valuation metric, measuring enterprise value divided by revenue, found the camping and hiking segment valued at 1.4 times EV/revenue.

Activity in the market has slowed even as valuations have retained or improved their levels. Capstone reported 27 deals so far in 2023 compared with 54 in the same time period of 2022.

“Eroding consumer purchasing power has negatively impacted transaction volume as many sector players have struggled to maintain similar levels of sales growth experienced during the pandemic,” the report said. “A tightened lending environment, exacerbated by turmoil among regional banks, has also added challenges to the M&A market for privately-owned companies.”

The declines in M&A volume are not unique to the Outdoor Recreation & Enthusiasts sector. Capstone said total middle market dealmaking fell 14.3% year-over-year in the first quarter as elevated interest rates and macroeconomic caution contributed to the moderating environment.

In March, Camping World announced a plan to double its store size in five years, citing promising acquisition targets.

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