Citizens’ 2024 M&A Outlook revealed optimism around the environment for dealmaking activity this year, underpinned by solid expectations for the U.S. economy and a pop in enthusiasm, especially among buyers.
The annual survey of 400 leaders at U.S. middle-market companies and private equity firms also uncovered notable trends related to interest in artificial intelligence assets, international dealmaking and the upcoming U.S. election that provide support for the upbeat forecast.
Midmarket firms were the most optimistic they have been since 2020, with 46% expecting a strong mergers & acquisitions market in 2024. Private equity firms were even more positive. More than half (52%) see strength in the current M&A market, up from just 38% last year. Further, 46% of PE firms expect higher deal volumes in 2024, compared with just 19% that expect deal flow to decrease.
Jason Wallace, head of Citizens M&A Advisory, said a sense of normalcy is returning to the M&A environment.
“Companies across sectors are looking at their economic prospects and seeing opportunities,” he said. “There is still caution, but that positive economic backdrop will continue to bring activity back to the market.”
Fewer midmarket companies cited operating factors such as commodity prices, interest rates and labor markets as headwinds for 2024 than did so in 2023, and the average economic forecast was significantly more optimistic than it was last year. Forty-six percent of midmarket companies and 50% of PE firms expect U.S. economic conditions to improve in 2024. Among those who expect an improving economy, 68% are likely to engage in M&A activity this year.
As economic conditions improve, more assets are expected to come to market, contributing to palpable buyer enthusiasm. Of the PE firms that see higher deal flow in 2024, 79% expect to buy more than they did in 2023, while only 21% expect to sell more. Among midmarket firms, the pool of potential buyers also expanded for the second year in a row.
“The disruptions to M&A in ’22 and ’23 have led to some imbalances; for instance, the sheer amount of private equity capital on the sidelines,” Gavin Slader, head of M&A at Citizens JMP Securities, said. “We are now seeing excitement from buyers, which could be just what the markets need to find balance again.”
The survey was conducted among U.S.-based middle-market businesses ($50 million to $1 billion in revenue), as well as PE firms (fund size less than $1.5 billion) that are active in the acquisition and sale of U.S.-based companies in the same revenue range. Core business sectors included Citizens’ industry specialties of aerospace, defense and government services; business services; consumer; gaming, lodging and commercial real estate; health care; industrials; technology, media and telecommunications; and transportation and logistics, as well as other industries.
Business executives at 277 middle-market firms and 123 PE firms who are directly involved in decision-making related to M&A (owners/partners, CEOs, presidents and other C-level executives and directors) completed a phone or web-based survey between November and December 2023.
For more information on this year’s Citizens Middle Market M&A Outlook, please click here.
