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February 19, 2024

Anna Ruth Williams



Investors predict a thawing of the M&A market beginning in Q2 2024

2023 was the worst year for U.S. private equity since 2016. On the heels of the previous sobering 12 months,  over 1,500 professionals recently gathered in Atlanta for ACG’s M&A South, the premier networking event in the South for participants in all facets of corporate growth and middle market deal-making. 

On tap for February 6th’s Opportunities & Optimism: M&A Deal Trends panel was the U.S.’s $3 trillion PE industry. 

Speakers from left to right: Chris Roselli, Eversheds Sutherland, Kate Kohli, TM Capital; Jeff Hawkins, Carr, Riggs & Ingram; Sterling Morris, Equifax, Inc.; Mark Dollar, Bank of America; Katie Stapleton, Eagle Merchant Partners

The speakers all rallied around the theme of “cautious optimism,” as TM Capital’s Kate Kohli put it. Or as Mark Doller, managing director at Bank of America colorfully said, “2024 will be the year of the thaw.” Here are the key reasons why:

  • Dry Powder. In 2023, PE capital deployed in the states fell by 29%. According to Pitchbook’s 2023 Annual U.S. PE Breakdown, “Slower deployment amid robust fundraising means that dry powder continues to build, swelling by 9% in the last two years to $956 billion.” M&A South panelist Jeff Hawkins, partner at Carr, Riggs & Ingram echoed that by saying, “there’s a lot of dry powder out there, [...] and we think that will cause loosening of the market.” Or as Katie Stapleton of Atlanta-based PE firm Eagle Merchant Partners put it “We’re hungry to put capital to work.”

  • Hopeful Sellers. 2023 left many sellers on the sidelines - holding out for the market to rebound and valuations to improve. Hawkins said his accounting firm is starting to see business owners more “psychologically prepared to go to market.” From the buyer side, Sterling Morris, director of corporate development at Equifax, explained, “I’m seeing a pourover of the slowness of last year’s market. There’s still some hesitation pent up among sellers.” He’s hopeful that some of that “starts to shift forward” and creates momentum in the form of tightened processes and expedited due diligence.

  • Desire for Exits. Last year, exit value fell by 26%. Because of the decline in activity, Kohli said, “firms are looking to raise their next funds but are getting pressure from LPs to generate liquidity, and that will be a boost to the market.” Pitchbook agrees, saying exits hold the key to a rebound. “Without a reboot in exits, we doubt that a durable recovery in dealmaking can take hold, and fundraising is likely to falter, as well.”

  • IPO Market. Pitchbook also notes that “a wide gap between public and private markets can help pry open a tight IPO window. That would be good for exits and carry over to M&A.” At M&A South, Doller added on, “There’s a lot of small and mid-size public companies that probably shouldn’t be public. We’ll probably see more divestitures and activism from the public company perspective, so we’ll see things carved out in this market.”

So, buckle up, it’s going to be an active year for M&A activity. Most M&A South attendees I spoke with believe the softening will begin in Q2, but caution that activity will likely slow later in the year as the 2024 presidential election brings with it inevitable uncertainty.

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