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M&A Report – Year-End 2023

The M&A market in 2023 was marked by uncertainty and challenges when compared to the previous year. The number of transactions and deal values both decreased, partly due to the lingering impact of the COVID-19 pandemic, a significant increase in interest rates, and owners’ value expectations that are slow to adjust to new market realities. According to S&P Global, the global M&A deal volume was down 27% from 2022.

Despite the slowdown, the current state of the M&A market is far from the downturn experienced during the Great Depression of 2008. There is still a lot of activity in the lower middle market, contributed from the retirement of Baby Boomer owners, and a move down from middle market players to the more attractive valuation metrics offered in the lower middle market. Throughout 2023, the decline in private equity-backed deal values outpaced the decrease in deal volume, confirming that fund managers were focusing on smaller deals.

Today's M&A market, especially for small and medium-sized businesses, emphasizes the importance of growth, diversification, client retention, and profitability margins. The previous concerns about a potential global recession are giving way to expectations of slow growth, especially in the US, with mild recessions projected for various Western European countries, as outlined by S&P Global Market Intelligence.

Looking ahead, 2024 is expected to be a much better year for M&A activity. There are indications of positive shifts in the global economy and a downward pressure in US interest rates expected in the third and fourth quarters of 2024.

Overall Market Insights

The “bubble” created by the pandemic continues to impact the M&A market. Some companies performed well during the pandemic; however, buyers want to know if the growth is sustainable or was a one-time spike. On the other end, buyers want to know if a recovery is achievable for those companies who suffered greatly during the pandemic. This uncertainty leads buyers and sellers to longer deal processes.

Rising interest rates negatively impacted valuations. As the Weighted Average Cost of Capital (WACC) increased, buyers looked for a lower purchase price to get deals done. According to the most recent report from GF Data, overall leverage in transactions was down from 3.7x EBITDA in 2022 to 3.1x in 2023. Such a dramatic drop in leverage lead to fewer transactions and lower valuations.

Bigger is better. Deals in the $10MM to $25MM value range were down 12%, while deals in the $50MM to $100MM value range were down 9%.

There has been a significant slowdown in fundraising for both VC and PE funds following record years of capital raises. Global private equity fundraising fell by 11.5% year over year by aggregate value in 2023, the lowest total since 2017.

  • Earnings matter. Buyers scrutinize earnings and seek profitable companies. Revenue alone is no longer the sole metric for VC investors... mimic the PE model.

  • Clean financial statements matter. Buyers are growing sick of ‘owner-related adjustments’ that account for more than 10% of EBITDA. As such, Buyers will discount these adjustments and rely heavily on a sell-side Quality of Earnings Report to base their EBITDA calculations.

  • Major consulting firms such as EY, Boston Consulting Group and Goldman Sachs all agree that 2024 will be an up-year in M&A.

M&A Outlook Research

Nov 16, 2023 – AlphaSense - M&A Trends and Outlook for 2024 >>>>

Dec 05, 2023 –S&P Global -The Big Picture 2024 – M&A Outlook >>>>

Dec 19, 2023 – Nasdaq - 2024: The Year for M&A Resurgence >>>>

Jan 16, 2024 – Middle Market Growth – Middle-Market Dealmakers Prepare for a Rebound >>>>

If you are considering a business transaction in 2024, feel free to contact us to explore our capabilities and discuss how we can contribute to your success.

About Pacifica Advisors

Pacifica Advisors is a cross-border mergers and acquisitions advisory firm serving small to medium-sized businesses with $1.5 to $25 million in EBITDA across the Western US & Mexico. Our M&A services include sell-side representation, buy-side advisory, capital markets, and business valuation.

Visit us at for a FREE opinion of value, or to learn how we can help get your business ready for a successful sale.

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