Mergers and acquisitions (M&A) continue to be a primary strategy for organizations seeking to expand their reach. The landscape for M&A deals in 2023 had its ups and downs due to a range of economic factors, such as rising interest rates and the Silicon Valley Bank crisis. As the year comes to a close, many business owners are wondering what 2024 has in store for M&A deals and how it may impact their bottom line.
Although the future is never certain, our business advisors anticipate that M&A activity will rise in 2024. Following are a few trends our advisors believe will impact the M&A landscape over the next year.
The Economy Is Calming Down
2023 had its fair share of market volatility, reducing M&A activity compared to previous years. When deals slow down, many investors and businesses use that time to evaluate potential opportunities so that they can strike when conditions start to improve. With interest rates hitting a recent peak, it’s expected that rates will start to stabilize heading into 2024, creating a more opportune environment for transactions.
More Owners Are Looking to Sell
It’s estimated that the baby boomer generation owns nearly 40% of small and privately owned businesses in the United States. Baby boomers range from ages 59 to 77 and aren’t getting any younger, with nearly 10,000 retiring on a daily basis and about 350,000 boomer-owned businesses being sold each year, on average.
With this large demographic aiming to retire, there’s also minimal succession planning across numerous organizations. According to LinkedIn, 35% of businesses lack a formal succession plan. Without a solid plan, even owners who haven’t thought about selling become open to the idea. Selling provides owners with the funds to finally retire and secures their business’s future. Pair the amount of business owners interested in retirement options with the expectation of calmer economic conditions in 2024, and it’s the ideal market for deals to emerge.
Digitalization Is Rising
Technology has continued to evolve at a rapid pace, especially this past year in areas such as artificial intelligence (AI) and machine learning. These recent breakthroughs have created a race among businesses to seek deals that allow for increased innovation within their operations. Businesses are hoping to capitalize on the power of the AI trend and stay ahead of the curve compared to competitors.
More businesses are also investing in technology such as enterprise software, which centralizes data and provides on-demand analytics so that they can make faster, more informed decisions when it comes to potential acquisitions. The ability to pull data more efficiently has streamlined the overall timeline for M&A deals, because buyers know exactly what type of organization they’re looking to acquire, and both parties now have all the information they need to close the deal.
Although there are plenty of other “what-ifs” that may impact the M&A landscape in the next year, the above trends are key indicators that M&A deals are going to remain an essential focus for businesses aiming to grow (or sell) in the near future. If your business is looking to secure deals in 2024 and you aren’t sure where to start, Creative Planning Business Services is here for you.
Our business advisors work with clients to refine their M&A processes so that they can feel confident throughout each phase of the transaction, whether you’re selling or buying. Schedule a meeting with our team today to learn more about what our services can do to add value to your next transaction.