We’re a quarter of the way through 2024. When it comes to middle-market mergers and acquisitions (M&A), this is roughly my 40th first quarter in the business. I am thinking about this one more, in part because I think deeper these days and was asked to share my thoughts. Better to know—and refine—my thoughts before I share them.
First, a few perspectives. I am an upbeat guy, and I have ridden the waves of the M&A ocean long enough to know there are rough waters and calm seas, and they often swim next to one another. My middle-market orientation and history are centered on privately held businesses, often founder led. I marvel at some of the businesses that have reached soaring heights through family ownership and entrepreneurial grit. I also have grown up, professionally, from the beginning of the private equity era, and strongly believe the capital and leadership from these purposeful investors have taken our country’s ecosystem to a new plateau. Over the past four decades, quality and innovation have teamed with capital, discipline, and pace to create some remarkable, high-performing enterprises.
Let’s not dwell on the decades of the past when the months ahead are so important. Trust me, reflecting on the past is far easier than assessing the future. I will segment this article along a few topical themes and provide some basic thoughts, observations, and statements regarding those topics.
Some Tough Sledding
Since the Q1 2024 data releases are generally in process, let’s take a data look at some longer-term trends and some recent quarterly data. As reflected in the charts below, things were trending well until COVID-19 impacted both 2020 and 2021 in meaningful ways. The 2021 spike in deal closings resulted from “inspired” sellers meeting “motivated” buyers. The pandemic was the final straw for many private business owners who thought they had seen it all. Many decided to de-risk their family wealth and sought new capital and strategic partners to affect a monetization strategy.
Our 2024 starting point trended fewer deals and lower valuations. While many envisioned that deal activity would pick up in 2024, the signs aren’t overly encouraging, based upon late 2023 data. As our conversational journey continues, I will share some anecdotal perspectives and data on why I believe we have better days ahead, and soon!
Challenges
M&A transactions need committed buyers Forvis Mazars.