CEO survey by Ernst & Young shows 98% of CEOs expect to be actively engaged in M&A transactions in 2024, projecting a 12% increase in deal activity. Middle market and lower middle market (LMM) transactions are expected to be especially strong in 2024 which is great news for small and midsize business owners preparing to sell their business in 2024.
These projections align with forecasts from top economists for the 2024 economy and investments and 52% of Private Equity Groups expect increased activity in 2024, 43% expect a stable 2024, with only 19% expecting a decrease in 2024. Surveyed Private Equity Groups have similar expectations about the 2024 economy.
Overall, 2024 is projected to be a good year for M&A and Lower Middle Market (LMM) business sale transactions. Small and LMM business valuations and transaction activity have not suffered as a result of the increased debt costs in 2023 and with the expected interest rate reductions in 2024 we see small and LMM deal activity increasing in the second half of 2024.
Tech Market Troubles in 2024?
Lower stock prices and higher debt costs, on the heels of high market valuations for tech companies, spell problems for tech acquisitions in 2024. With that said, this problem will plague large M&A transactions and IPOs, but not necessarily small and lower middle-market (LMM) tech transactions. Small and LMM tech companies are historically more stable in both valuations and transaction activity. At Pacific Business Sales our expectations for 2024 LMM tech business sales are continued and modest growth, with some sectors outperforming the general market. In general, if the company has solid financials, good earnings, and continued growth, we expect it to do well on the market in 2024.
At the December 2023 ACG Middle Market Insights webinar, Brenan Daly, research director in tech M&A at S&P Global Market Intelligence said, “2023 is coming in as the sharpest decline that we have ever seen in the tech M&A market. We’re basically bottoming out from where we were a decade ago. It’s about half of the spend of 2022 and the past five-years rolling average”.
- Association of Corporate Growth (ACG) Middle Market Growth blog: Corporate M&A Stirs up Momentum for 2024
- How will the 2024 Economy affect Small Businesses and the M&A market?
- Ernst & Young 2024 M&A Outlook Points to Gradual Rebound