Looking Ahead at M&A in 2024

by Andrew Sannes

While U.S. deal volume declined in 2023 due to the persisting uncertainty from global economic and market influences, the lower middle market remained active in M&A for high-quality and strategic opportunities. Recession fears and the Federal Reserve’s raising interest rates to battle inflation, several bank failures, geopolitical uncertainty growing due to the Hamas/Israeli conflict, the continued Ukrainian/Russian War and China’s desire to appropriate Taiwan were all notable events in 2023, among others. Though several of the factors that hindered M&A activity are still a concern, there is more general optimism looking into 2024.

It appears some of the headwinds are less of a gale force and calming to a breeze. As the Federal Reserve has hit the pause button on inflation rate hikes, analysts are expecting a soft landing, and a number of sectors of the market appear to be relaxing as a result.  Many analysts believe that M&A activity will pick up in 2024, driven by these interrelated factors.  With greater comfort with the industry outlook for the debt markets, it is expected that M&A players will be getting back in the game.

As larger deals continue to meet obstacles, particularly in the United States where antitrust concerns are a growing focus of regulators and lower debt multiples impact valuations, lower middle market deals will stabilize and increase. Small to mid-size deals are less susceptible to volatility as they are not as impacted and less likely to be derailed due to external market forces like geopolitical events. Even more notable, the small to mid-size deals are less expensive in the short and long term because these deals are much smaller in terms of enterprise value, requiring less cash up front and overall, as well as less of a need for financing at relatively high interest rates.  Also, as noted above, big deals are subject to greater scrutiny by the government, which doesn’t exist at the same level for the smaller deals.

All things considered, M&A industry players generally agree that M&A activity will rise in 2024 as buyers will continue to acquire businesses to support their core business. Further, a lack of opportunities in 2023 has pent-up demand growing.  This, along with consolidation and divestitures in certain industries, will drive an upswing in M&A.

M&A activity for many industries has been driven by corporations and private equity portfolio companies seeking strategic expansion of platforms and programs, and technology to increase gains in productivity and efficiency. Moreover, the need for speed in business transformation, which is accelerating thanks to technological advances and the evolving economy, will keep dealmaking front and center.  

Taureau Group is working with a number of companies in various capacities – looking to sell, recapitalize and make acquisitions. When considering the unique needs facing various industries, it is important now more than ever to find the best partner who understands your company’s objectives, from developing ways to increase efficiency, expanding product/service offerings, shoring up supply chains, exploiting growth opportunities and finding skilled employees. Taureau Group will provide creative, unconflicted solutions and strategies with unequivocal attention to your company’s M&A goals and success.

Below is a sampling of recent transactions proudly completed by Taureau Group:

For more information or to discuss your specific situation or objectives, please contact Andrew Sannes, Managing Director & Shareholder, at as@taureaugroup.com or any member of the Taureau Group team here.