Once again, we are pleased to provide you with our annual thoughts on the merger and acquisition market. In acknowledgement of our collective attention spans, we will keep this one concise.

As we enter 2025, we believe the market is positioning itself for a more balanced and pragmatic environment. That said, we would be remiss to not begin by addressing the past year.

As noted in our 2024 communication, we thought the deal environment would be challenging in part due to higher interest rates. However, the overall deal community was optimistic that the second half of 2024 would rebound and end the year on a high note. Unfortunately, while there were pockets of activity, the broader market remained sluggish. In their
Q4 2024 forecast Firmex noted:

DEAL ACTIVITY

For the last half of 2024, only 20% of advisors said deal volume was above average, and 38% saw below-average activity.

Deals took longer to negotiate, with more falling apart before completion. Few advisors see the process getting smoother next year.

VALUATION ACTIVITY

39% of advisors noted valuations were below average.

Our experience in 2024 reflected the market. We saw lower deal volume and found the environment challenging to get a deal completed, with the time to complete a deal continuing to grow.

A recent panel discussion at the AMAA conference noted that
deal timelines have increased by 40% – 80% since 2010. As one of our clients noted, buyers in the LMM are conducting due diligence in “excruciating detail.” We think this can be attributed to the continued growth of professional buyers who apply a PE approach to smaller deals.

2024 Activity from Institute for Mergers, Acquisitions, and Alliances (IMAA)

On the sell side, expectations haven’t adjusted to market realities. Uncertainty has made sellers hesitant, intensifying an already emotional negotiation process. Managing these complexities and keeping the parties focused in elongated timelines is a critical skill for a seller to have on their advisory team.

The market appears to be taking the same approach coming into 2025 as last year: slower deal activity is expected in the first half of the year but
is projected to ramp up in the second half.

While we generally take a contrarian view on markets and trends, we agree with projections and are optimistic that 2025 will bring a more balanced deal environment. Swings between the buyer/seller market should stabilize into a more pragmatic equilibrium.

As always, quality will remain front and center. For sellers, this means
above-average multiples are still achievable–– but only if they are properly positioned. We will continue to fastidiously work on our ownership teams’ transaction readiness to ensure maximized value and avoid any deal killers during due diligence.

If you or someone you know would like to confidentially discuss a potential business sale, please contact us at Michael.Vann@Vann-Group.com.

COPYRIGHT 2020 VANN GROUP. ALL RIGHTS RESERVED.