From Uncertainty to Opportunity: M&A Transitions into 2024

As it relates to merger and acquisition activity, 2023 marked a year of cautious recalibration among corporate and private equity buyers alike. The sector experienced a 15%-20% decline in M&A activity compared to 2022, and an even more pronounced 35% dip from the 2021 peak. This downturn was not entirely unexpected, as the fear of buying into a potentially substantial recession deterred buyers, leading many to sideline their acquisition plans.

That being said, 2023 actually unfolded more favorably than anticipated, as the initial apprehensions about a dramatic economic downturn eased as the year progressed. 2023 ended on a positive note, with inflation cooling and interest rates stabilizing, promoting a gradual resurgence of confidence among buyers. This renewed optimism is evident in the expectations for 2024, where M&A activity is projected to rebound by approximately 12%.

2024 is a presidential election year and an interesting one at that. While this provides good talking points, historically, neither the election year nor the specific prevailing party has actually had a meaningful impact on overall M&A activity. GDP growth has a much stronger correlation, and when you look at tempering inflation, anticipated interest rate cuts, easing supply chain challenges, and steadier employment dynamics, it is setting the stage for a healthier economic landscape in 2024 and beyond.

Overall, as we get further into 2024, the M&A environment appears poised for recovery, buoyed by returning confidence and realistic expectations. Baby boomer owners aren’t getting younger, organic growth isn’t getting easier, and private equity firms aren’t receiving less pressure to deploy their funds. While challenges certainly remain, the outlook for M&A is a cautiously optimistic one. ABI