This past week, the Balmoral Advisors team attended the Association for Corporate Growth (ACG) Chicago 2024 Annual Market Trends event, a key yearly forum for professionals in the industry. The keynote speaker was Lindsey Piegza, Chief Economist at Stifel Nicolaus & Co, accompanied by a panel of experienced experts. Together, they reviewed last year’s trends and shared their expectations for M&A activities in 2024. Their analysis, while based on familiar economic conditions, offered a practical perspective on the changing dynamics of the market and the future of deals in the coming year.
- 2023 marked a dip in middle-market deal volumes, with a notable decrease in sell-side closing rates. Acquisitions were the predominant deal type, often experiencing extended closure timelines. Credit approvals and fundraising activities both fell below usual levels, reflecting a cautious market sentiment.
- The economic backdrop played a significant role in shaping these M&A trends. Despite some positive indicators, the economy is still navigating its recovery path. Despite a recent uptick, the unemployment rate, remains historically low. Inflation rates have declined but have yet to achieve the federal target of a sustained 2%. Market anticipations of a rate cut in 2024 are likely postponed to the latter half of the year. Elevated mortgage rates have adversely affected the housing sector, and while consumer spending continues to be robust, it shows signs of weakening.
- In response to these economic challenges, companies have demonstrated adaptability and resilience. Deal structuring in 2023 saw more inventive approaches, including earnouts, increased seller rollover, seller notes, and preferred equity, to align with seller valuation expectations. Fundraising levels were subdued compared to previous years, while some private equity groups consider lengthening their investment horizons due to previously unutilized capital commitments. Conversely, the panel anticipates that 2024 will witness the sale of some high-quality private equity assets, driven by the desire to secure strong returns ahead of forthcoming fundraising efforts. Firms such as Blackstone and KKR are expected to continue to introduce larger and more diverse funds.
Reflecting on the insights from the ACG Chicago 2024 Annual Market Trends event, we see a dynamic landscape for middle-market deals, rich with both challenges and opportunities. At Balmoral Advisors, our commitment is to stay informed and ahead of these shifts. This ensures that our guidance to clients remains not just relevant, but also strategically sound and tailored to unique scenarios. If you’re looking to navigate the nuances of this next year, or if you simply want to discuss the potential impacts of these trends on your business, we encourage you to reach out to us.