Navigating M&A Trends in 2024: Looking Ahead

Working Through Uncertain Times: The New Normal 

As we step into 2024, the landscape of mergers and acquisitions appears both challenging and promising. A retrospective analysis of the previous year reveals some interesting patterns and shifts that set the stage for an exciting year ahead. Let’s take a look at key trends in 2023 and explore the implications they hold moving forward into the deal landscape of 2024.

  1. Deal Volume and Valuation Trends:

The data from 2023 paints a picture of reduced deal volume, estimated to be 25-30% less than the previous year. However, looking ahead into 2024, there is a positive shift anticipated. Despite uncertainties such as a national election, global conflicts, and rising interest rates, the market expects an increase in deal volume at strong multiples. This additional volume will be largely driven by excess cash waiting to be deployed by corporates and private equity buyers.

  1. Financing Challenges and Impact on Structures:

Financing presented challenges for companies in 2023, especially in the lower middle market. Interestingly, while financing and interest rates did not significantly impact valuations, they influenced deal structures. The response was a surge in structured transactions, incorporating elements like seller financing, earnouts, and equity rollovers.

  1. Rise in Due Diligence:

Buyers in 2023 exhibited a risk-averse approach, intensifying the level of due diligence. High-quality businesses that could withstand this scrutiny emerged successful, underlining the importance of robust fundamentals. This emphasis on thorough evaluation is expected to persist, making preparedness a key aspect for potential sellers.

  1. Activity in the Lower Middle Market:

Despite an overall decrease in deal volume, the lower middle market, encompassing deals less than $250 million, remained robust. The metrics showed increased interest from potential buyers, with the number of interested parties and interactive calls surpassing expectations. Strong businesses in this segment continued to attract attention and maintain market activity.

  1. Buyer Aggressiveness and Direct Outreach:

A noteworthy shift was observed in buyer behavior, with increased aggressiveness in reaching out directly to business owners. Sellers entering the market with existing offers experienced enhanced deals, underscoring the advantage of strategic positioning and engagement with experienced advisors like Strategic Exit Advisors (SEA).

  1. Outlook for 2024: Increased Volume at Strong Multiples:

Despite the uncertainties looming in 2024, including a national election, global conflicts, and rising interest rates, volume is expected to increase at strong multiples. The additional deal volume will be largely driven by excess cash waiting to be deployed by large corporates and private equity buyers. 

  1. Private Equity Dynamics:

Private equity groups, holding a significant $2.6 trillion in undeployed funds, are anticipated to deploy capital more aggressively in 2024. The low deal volumes of the previous year are likely to prompt private equity and family offices to pursue opportunities with increased enthusiasm. This heightened competition could potentially lead to stronger valuations for well-prepared companies.

  1. Seller Preparedness and Storytelling:

Sellers are advised to be prepared for rigorous due diligence and a larger buyer pool. The emphasis on storytelling — presenting a narrative that encapsulates a company’s journey, challenges faced, and strategies implemented — has become pivotal. Buyers are increasingly interested in understanding a business’s resilience and evolution over time.

  1. Stability in Economic Conditions:

Unlike the 2008 financial crisis, the current economic environment exhibits resilience. Efforts to inject money into the economy and maintain a stable banking system have contributed to a more favorable climate. Businesses have shown adaptability and resilience in overcoming challenges.

  1. Looking Ahead: An Optimistic Perspective:

As we look ahead, we have an optimistic outlook for 2024. The uncertainties, including the national election and geopolitical issues, are perceived as known variables that businesses have learned to navigate. With strong fundamentals, businesses are expected to command favorable valuations.

M&A trends observed in 2023 serve as a compass for the journey into 2024. While challenges and uncertainties persist, the market has exhibited adaptability and resilience. SEA continues to play a pivotal role, guiding businesses through the complexities of M&A, enhancing valuations, and ensuring strategic positioning in a dynamic landscape.

The success of an M&A deal hinges on numerous factors, but the importance of a strong management team cannot be overstated. A skilled and united management team brings invaluable expertise, leadership, and vision to effectively navigate challenges and capitalize on opportunities that arise from M&A.

When entrepreneurs work with SEA, they are able to collaborate with a team of M&A experts to overcome challenges, navigate the emotional aspects of M&A, and optimize their strategic exit. At SEA, we are committed to understanding your transition goals and tailoring our process to ensure a clearly defined outcome. 

Whether you’re on the buy side or the sell side, our comprehensive advisory team is ready to navigate challenges, optimize strategies, and contribute to a seamless and successful exit. Reach out to us anytime at (215) 489-8881 or schedule a conversation here.


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