Davis Polk partners Jack Orford and Robert Smith were featured in Private Equity International discussing their innovative approach to get deals over the line and current trends.

Speaking about what they are observing in the PE deals market, Jack noted that they “have seen M&A activity gradually ramping up.” Robert agreed, saying, “All of the ‘cautious optimism’ that we have been hearing about over the past nine months now feels like it is coming to fruition, and we expect that to lead to more deal activity in 2025.”

With this anticipated increase, sponsors are looking at a variety of new angles to complete deals. “With the cost of debt still elevated, sponsors have also gotten creative in finding other pockets of capital to use to finance these deals,” Robert said, noting that seller notes, earn-outs, PIK instruments and co-investments are potential options available to buyers.

Looking forward to 2025, Jack said, “[There are] cases where incumbent lenders are showing up and offering proactively to reprice and remove the risk of a bigger process that might lead the sponsor to look for another lender. So, certainly we expect that refinancing work to get busier.”

He continued, “The theme to watch now is going to be how quickly rates come down and how quickly that spurs an uptick in M&A activity, but we are certainly optimistic about more deals getting done in the next 12 months.”

“Creative deal structuring spurs an uptick,” Private Equity International (November 1, 2024) 

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