A multitude of factors influenced M&A dealmaking in 2022. Rising interest rates, a retreat of leveraged finance, and inflation are just some of those headwinds that caused a slowdown in activity. So, what is expected of M&A this year, and what are some variables that are going to be critical in decision-making?
It’s hard to predict where dealmaking will go this year or how fast it will rebound. Rather, many factors are going to influence the success of business owners looking to sell or acquire companies to fill gaps in their business model. Understanding what those are ahead of time and continuing to monitor them throughout the year will be crucial in making valuable decisions for sellers, buyers, and investors alike.
Interest rates and inflation are going to be two key factors to monitor in 2023.
While a continued rise in interest rates caused many buyers and sellers to halt in 2022, we can expect that they will continue to influence how deals are done this year. Buyers with more liquidity are likely to be a key players in dealmaking success, but sellers could also see lower valuations from buyers and alternative payment methods, such as seller financing and earn-outs.
Inflation will go hand in hand with interest rates and their influence on dealmaking. A reduction in purchasing power, rising operational costs, and an increased due diligence period will all be side effects of inflation and its impact on dealmaking.
Now, more than ever, it will be imperative for sellers to understand their market position and demand, as well as their profitability and strength going into deals. Realigning expectations and understanding key economic variables affecting their value, along with having a trusted team of Advisors, will enable sellers to navigate the complexities of the market and find success.
M&A Advisors can take the stress out of the dealmaking process, allowing business owners to continue focusing on running their businesses. The Aberdeen Team is committed to ensuring business owners reach their selling goals with respect to their businesses, employees, and families. Reach out for a free consultation to learn more about how we can help.