As we head into the second half of 2023, industry analysts expect an upswing in M&A activity. According to PWC, despite a 4% decline in deal volume during the first half of 2023, deal volume remained higher than 2019’s pre-pandemic levels. With inflation predicted to normalize, the M&A market is forecast to pick up momentum in response to pent-up demand and record levels of dry powder.
As financing remains expensive and increasingly difficult to obtain, buyers will remain very selective about the deals they pursue. They will look to add structure, such as seller notes, earnouts, and required equity rolls, to ensure alignment.
Sellers may expect more intensive due diligence, longer look periods on the quality of earnings, as well as a deeper dive into customers, end markets, and value add propositions. Sellers may also expect more scrutiny of management teams, greater emphasis on technological capabilities, and ultimately, more analyses on overall value creation.
As buyers seek more justification than ever around their investment thesis of any given opportunity, sellers must be exceptionally well prepared to compete for buyers’ interest. Sellers should be able to provide historical financial statements with integrity, operational data reporting at a granular level, sound growth opportunities, technology improvements, and easily identifiable cost reduction opportunities.
Having a successful track record of shepherding business owners through the transaction process before, during, and after the pandemic, Aberdeen is in tune with what buyers are looking for, and we are proven experts in matching the right buyer with the ideal seller.