“Amidst increasing rates and political uncertainty, owners are not merely adapting to change; they are utilizing it as a pathway to opportunity, positioning 2024 as a favorable time for those considering business sales.”
2024 M&A Outlook: Seizing Opportunities Amid Election-Year Uncertainty
As we approach 2024, the M&A landscape unfolds with both promise and challenge for sellers and buyers alike. Join me in deciphering the M&A outlook for the coming year, where economic, industry, and political factors intricately shape the dynamic landscape.
Amidst this interplay, the M&A market presents uncertainties, demanding a profound understanding of the currents shaping its trajectory. Economic headwinds, evident in inflation and potential financing cost escalations, cast shadows on pricing dynamics. Yet, a glimmer of optimism arises from more favorable tax policies due to a political shift in Washington, DC, creating a conducive environment for dealmakers.
Challenges loom on the path forward. Talent shortages and the evolving workplace, marked by hybrid arrangements and assertive employees, present hurdles. External factors, from geopolitical risks to disruptions in supply chains, remain substantial but against a backdrop less tumultuous than the transformative year of 2020.
Whether you’re contemplating selling your business or strategically positioning yourself as a buyer, let’s embark on this journey together, gaining insights to empower decisions in the dynamic landscape of 2024.
Economic Dynamics: Navigating the Economic Landscape
In 2024, the M&A is marked by nuanced economic dynamics. For business owners eyeing a sale, maintaining a vigilant stance is crucial. Scrutinizing key economic indicators, interest rates, and inflationary pressures becomes imperative, recognizing their profound influence on buyer behavior and the overall outcomes of M&A transactions. Inflation, reaching 9.1% in June 2022, has since plateaued at 6.0% as of February 2023. This shift empowers companies with enhanced pricing power while tempering demand. Solid consumer spending, driven by real personal income gains and sustained private investment, is anticipated to underscore a steady pace of growth around 1.8% in the United States for 2024.
Economists Joe Brusuelas and Tuan Nguyen from RSM provide a detailed analysis in The Real Economy’s December issue. They foresee policy tailwinds, anticipating a gradual easing of inflation to a more manageable 2.5% to 3%. Forecasting four 25 basis-point cuts in the federal funds policy rate, potentially bringing it into a range between 4.25% to 4.5% by the end of the year, with a risk of a lower rate. GDP is expected to rebound, reaching or surpassing the trend rate of 1.8% in the latter half of 2024 and possibly accelerating into 2025. This data-driven perspective equips M&A stakeholders with valuable insights for navigating the economic landscape in the dynamic year ahead.
Industry-Specific Trends: Hotspots and Resilience
Each sector embodies a unique blend of stability and unpredictability. In 2024, technology, healthcare, and sustainable energy emerge as anticipated M&A hotspots, fueled by evolving consumer needs and global trends. Ongoing consolidation opportunities are evident not only in the automotive industry but also in Building Services—a pivotal sector for constructing, operating, and maintaining buildings, providing essential services in heating, cooling, electrical power, communication, and plumbing infrastructure. A profound understanding of industry dynamics is paramount for crafting a successful sales strategy.
Navigating Election-Year Considerations
Over the past three U.S. presidential election years—2020, 2016, and 2012—distinct M&A patterns emerged.
In 2020, the pre-election period showcased robust deal-making until the COVID-19 pandemic induced a substantial second-quarter slowdown, compelling companies to adopt a cautious stance. However, the post-election period, marked by vaccine breakthroughs and political clarity, saw a resurgence in M&A as delayed strategic transactions were pursued.
In 2016, akin to 2020, the run-up to the election introduced uncertainty, leading to a pre-election dip in M&A activity. Yet, the election of Donald Trump spurred a post-election surge, driven by heightened market confidence and expectations of a pro-business administration. Deals across various sectors exemplified the impact of political transitions on the M&A landscape.
Turning to 2012, a cautious optimism characterized the pre-election M&A landscape. Companies pursued strategic opportunities amid global economic uncertainties, setting the tone for a measured pace of deal-making. Following President Barack Obama’s re-election, M&A activity experienced a modest uptick, with the broader economic environment playing a pivotal role in shaping deal dynamics.
Observations reveal sector-specific variations in each election year. Technology, healthcare, and energy sectors responded differently to election-related uncertainties and policy expectations. Global economic conditions and geopolitical events were additional factors influencing M&A trends. Anticipations of regulatory changes under new administrations influenced deal timing and structures, particularly in sectors sensitive to government policies.
Strategies for a Successful Business Sale in 2024
- Early Preparation: Given the uncertainties of an election year, early preparation takes center stage. Commencing the process well in advance ensures that financials, documentation, and operational aspects are in optimal condition.
- Expert Guidance: Engaging seasoned M&A advisors, such as myself, is a strategic move. Our ability to navigate election-year intricacies and provide insights into market trends and potential political impacts is invaluable in shaping a successful sale strategy.
- Flexibility in Deal Structure: In a dynamic environment, flexibility in deal structures becomes a dealmaker. Consider alternative structures that offer risk mitigation for both parties, ensuring a smoother transaction even in uncertain times.
Conclusion: Seizing Opportunities in 2024
While selling a business in a presidential election year introduces unique challenges, it equally presents opportunities for strategic and forward-thinking entrepreneurs. Staying informed, maintaining transparency, and leveraging expert guidance position business owners for success in the M&A landscape of 2024.
Embark on this journey with the understanding that knowledge is your greatest asset. Stay tuned for further insights and updates as we navigate the evolving landscape of M&A in the year ahead.