Time to sell? Sales of privately held businesses trending upward
After a disappointing 2023 in middle-market M&A, both the U.S. economy and the market for closely held companies are off to good starts in 2024.
Fueled by robust economic data, expectations for lower interest rates, and a more positive lending environment, optimism for middle-market M&A is generally on the rise, according to the “US Private Capital Report” released by Eaton Square and highlighted below.
- Eaton Square is an international M&A and capital service provider whose network encompasses Europe, North America, Australia/New Zealand, and the Pacific Rim. Our strategic partnership with Eaton Square increases our exposure to buyers and sellers internationally and offers greater access to capital and expertise in key verticals.
The report delivers encouraging news for potential business sellers and provides a positive contrast with last year’s M&A activity, which was hamstrung by inflation, high interest rates, and, for most of the year, lack of consensus about the health of the U.S. economy.
“The market seems to have a newfound interest in getting deals done,” observes IBG Business co-founder John Johnson (Oklahoma). “The combination of pent-up demand, banks getting back in the lending game, and general confidence in the market is sparking a surge in deal activity.”
The current outlook is a welcome contrast to 2023. Last year, according to the Eaton Square report, private business sales “dropped precipitously … totaling only $1,389 billion (down from $2,325 billion in 2022), while leveraged loan refinancing continued to decline year-over-year since its peak in 2021.”
The final 2023 U.S. GDP growth of 3.1% arrived too late in the year to spark the number of closed deals, but, as the report notes, it set the stage for a rebound in 2024, “on the heels of both tighter pricing indications and increased leverage tolerance indications for January, [leaving] little doubt that macroeconomic conditions have improved appreciably over the course of the last quarter.”
Looking ahead to 2024 M&A activity, the report describes a “definitive transition, from a ‘risk-off’ lending environment to a decidedly more aggressive and bullish lending ecosystem, epitomized by classic supply and demand market influences … a dearth of deal flow, and an overabundance of institutional liquidity.”
The report anticipates an M&A market “where not only premium assets (i.e., well capitalized, sponsor-supported, and reasonable leverage) can achieve superior pricing and terms, but where all [sellers] will find a more hospitable lending community.”
IBG’s Take on 2024
The conditions that depressed the sale of private companies in 2023 seem to have remedied themselves as we move into the second quarter of 2024.
“Plain and simple, there’s money in the market,” said IBG Fox & Fin’s Jim Afinowich. “Banks are lending, private equity and individual buyers are sitting on cash, and market concerns have waned.”
Throughout the IBG network – in Arizona, Colorado, Nevada, New Mexico, North Carolina, Oklahoma, Pennsylvania, and Texas – our seller inquiries, new offerings, and deal activity support Eaton Square’s optimistic outlook for growth and M&A opportunity and a period of “enhanced collaboration and prosperity.”
For sellers and buyers alike, now is an opportune time to seize the moment and capitalize on the evolving market dynamics. Visit our M&A team page.