The US M&A market is experiencing divergent trends in terms of deal volume and value this year. While the number of deals decreased by 22% month-over-month year to date, the total deal value has surged to its highest level in the past year, reflecting a 10% year-to-date increase. This growth in deal value is primarily driven by a rising trend in larger transactions, with deals exceeding $500 million now comprising nearly half of all transactions in 2024.
However, the lower-middle market has seen a significant downturn, with transactions valued at less than $250 million experiencing a notable decline this year. This suggests a shift in focus towards larger, more strategic deals among acquirers.
Several key factors are shaping the current M&A landscape:
- Take-private deals: There has been an increase in take-private transactions, indicating robust interest from private equity firms in deploying capital.
- Cross-border investments: Cross-border M&A activity has seen a resurgence, signaling renewed confidence in international dealmaking.
- Baby boomer exits: There is significant pent-up demand from baby boomer business owners who have been waiting for economic improvement before considering an exit.
- Fundraising challenges: Despite increased activity, fundraising for private equity remains challenging, with longer timelines and a concentration of capital among established firms.
Future Outlook
Dealmakers are anticipating an optimistic resurgence in M&A activity following recent interest rate cuts. However, the IPO market may not fully recover until later in 2025.
The upcoming presidential election adds a layer of uncertainty, as historical trends indicate a decline in deal volume and values during election years. Nevertheless, the combination of substantial dry powder in private equity and strategic acquirers’ cash reserves could lead to an unexpected spike in transactions.
Potential Catalysts
- Tax changes: As potential tax changes loom, sellers may expedite their exit strategies, creating a unique dynamic in the market.
- Interest rates: Further interest rate cuts could stimulate more deal activity by reducing borrowing costs.
- Economic stability: Continued economic stability and growth could boost confidence among both buyers and sellers.
While challenges persist, the potential for a strong M&A market in the fourth quarter of 2024 and beyond remains on the horizon. Dealmakers will need to navigate carefully through the complex landscape, balancing opportunities with potential risks and uncertainties.
The M&A landscape is evolving rapidly, presenting both challenges and opportunities for businesses considering a sale or acquisition. While larger deals are dominating the market, there’s still potential for activity across all segments. The combination of economic factors, potential policy changes, and pent-up demand from baby boomer business owners could create a dynamic market in the coming months.
If you’re a business owner contemplating an exit or considering growth through acquisition, now is the time to start planning. The current market conditions offer unique opportunities but navigating them requires expertise and careful strategy. Don’t wait for the perfect moment – it may never come. Instead, take proactive steps to position your business for success in this evolving landscape.
Contact one of our Twelve Points Business Advisors M&A experts today to discuss your options and develop a tailored strategy that aligns with your goals and the current market dynamics. Whether you’re looking to sell, buy, or explore strategic alternatives, we’re here to guide you through every step of the process and help you maximize value in this complex environment.