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Midmarket firms expect dealmaking to rebound

Jan 22, 2024
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Illustration: Allie Carl/Axios

Midmarket firms are expecting M&A activity to rebound this year, propped by a stronger economic outlook and more optimism among buyers, according to a Citizens Financial Group M&A report.

Why it matters: A positive market outlook could be a catalyst to starting sale processes, says Gavin Slader, head of M&A at Citizens JMP Securities.

Zoom in: About 46% of midmarket firms expect a strong M&A market in 2024, per the report, which polled executives at 277 middle-market companies and 123 PE firms.

  • Most players spent the last 18 months hunkering down and protecting their margins. Now, they're ready to think about growth again, he says.

Meanwhile, more than half of PE firms expect to see a strong M&A market this year, up from 38% last year.

  • About 46% of PE firms expect higher deal volumes as well, versus 19% that expect deal flow to decline.
  • There's pent-up demand to deploy capital, especially if interest rates come down or the increases slow.
  • Around 80% of PE firms that have a positive outlook expect to buy more than they did last year while just over 20% expect to sell more.

Of note: The IPO market could also boost market confidence.

  • "There's just the psyche component to seeing IPOs not only come to market but then trade well in the aftermarket," Slader says.

The intrigue: The 2024 U.S. election could drive M&A in the first half of the year, not stymie it, the report says.

  • Over 40% of midmarket companies say the election will likely spur them to pursue M&A this year.
  • Some businesses primed for a sale will want to go to market earlier in the year to get ahead of "the noise around the election," Slader says.
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