As we move deeper into the 2023 deal landscape, one thing is abundantly clear: Deal flow has experienced a significant slowdown over the last few quarters. According to PWC, private equity deal volume declined 22% during the second half of 2022 compared to the year prior. The drying up of the debt market, increases in inflation and interest rates, and the macropolitical environment are all ingredients that have led to the slowdown in deal activity. According to The Middle Market’s Mergers & Acquisitions, “The world’s dealmakers are enduring their worst start to a year in two decades, as economic and financing headwinds continue to prevent a bounce back in mergers and acquisitions.”

However, with record levels of dry powder and new, recently closed buyout funds across the industry, we believe firms will find a way to get deals done in 2023—but their processes for doing so will have a higher acceptable diligence threshold to close. In other words, we expect investment teams will spend more time analyzing what’s under the hood of a potential target acquisition in 2023 than they may have in 2020, 2021, and the first half of 2022. They will scrutinize areas such as financials, taxes, legal, operations, cyber, market outlook, and yes, even insurance and risk management.