2024 M&A for Lower and Middle Market Business Owners: Anticipated Increase in Deal Flow

After a decline in overall M&A volume in 2023, the majority (51%) of M&A advisors surveyed expect an increase in M&A deal flow in 2024, signaling a potential market upturn. However, Stony Hill believes the slowdown will persist through the election.

Middle Market Outperformance

Despite the broader M&A market decline, middle market deal activity (enterprise values $10M-$500M) continued to outperform the overall market in 2023,according to 57% of investment bankers surveyed. This trend is expected to continue in 2024.

Stabilizing Purchase Multiples

M&A purchase multiples compressed in 2023 due to elevated inflation and interest rates but are expected to stabilize and potentially increase in the second half of 2024 as financing conditions improve. Stony Hill believes downward pressures will continue into the middle of 2025 post-election.

Buyers' Market Persists

Private equity firms with record levels of cash are not proving to be eager to deploy capital, while strategic acquirers have strong balance sheets, positioning them to be active M&A participants in 2024 as the buyers' market persists.

Importance of Strong Fundamentals

Sellers who can demonstrate strong financial performance, healthy margins, and scalability will be most attractive to buyers in the 2024 M&A market. Proper planning and preparation will be critical for business owners looking to maximize value.

Bumpy Landscape Until Conditions Improve

The 2024 M&A landscape is expected to be bumpy for lower and middle market business owners until market conditions improve, and valuation multiples will remain moderately compressed compared to recent peaks.

June 7, 2024

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