A slowdown of M&A deals since February may be causing a pause for sellers and buyers alike. Contributing factors such as rising interest rates and the possibility of a recession looming are creating instability in the market. But is the slowdown truly a cause for concern just yet?
Many M&A leaders are saying there is still the opportunity for a healthy outlook on dealmaking in 2022 and that the pace could only appear to be a slowdown due to last year’s uncharacteristically high number of deals in comparison. Still, economic uncertainty is a factor, among others, to be aware of as sellers consider exiting their business.
Emerging factors to consider are the current administration’s focus on antitrust regulation, along with talent shortages, inflationary pressure on wages, and changing labor laws. Additionally, ESG considerations are becoming even more critical in the due diligence process, with more companies adopting ESG plans proactively rather than reactively.
The current administration’s rigid regulatory stance is expected to create an uptick in the length of deal timelines. Because of this, potential buyers and sellers are taking longer in preparation to ensure they are able to meet regulatory requirements.
Most notable, however, is the likelihood of an economic downturn, focusing on inflation and the potential for the U.S. to enter a recession. This shift could cause a new economic era, defined by a tightening of monetary policy and the Fed raising interest rates even higher. While the changes will not appear overnight, it is something that sellers need to consider as they plan for a potential exit in the coming months.
Understanding how a recession could shift the market for buyers and sellers is imperative, especially if you’re a business owner who has been considering exiting for a while. If you’re a business owner considering exiting this year, reach out to the Aberdeen team to learn more about how our Advisors can provide the proper guidance and economic advice to ensure you can reach your selling goals.