Survey Says: Five Trends Driving M&A in 2023

By Generational Group


On an annual basis our good friends with Bain release a survey of M&A sentiment/plans among folks that are active, professional buyers. Their research is always compelling and highly accurate.

This year, anticipating a potential economic downturn sometime in 2023 (although the jury is still out on that story line) they compared their findings to the data they collected during the Great Recession on 2008-2009 and found one key fact:

In an uncertain market, executives make bold moves that define the future.

Generational’s deal making teams have seen this time and time again during multiple economic transitions, all the way back in many cases to the late 1980s. The fact is, as we discussed in a recent article, professional buyers stay active because they know that the ROI never ceases and  are always looking for well run, middle market companies to acquire, because they are focused on the much longer term time line and know that their returns magnify and multiply over time. This is how Bain’s research played out:

Bain research on M&A in times of turbulence validates how M&A was part of the winning response in previous down cycles. They examined the acquisition activity of 2,845 companies from around the world during the global financial crisis and economic downturn of 2008–2009. They found that in the long run, companies that executed at least one deal per year during the economic downturn earned 120 basis points more in total shareholder returns than companies that were inactive in M&A. Moreover, as they explore in the chapter “M&A in Times of Turbulence: Lessons from the Last Recession,” many industry-defining deals were made throughout the last downturn.

So for those of you thinking of staying on the sidelines in 2023 and putting your exit plans on hold, think again! History tells us that you will find buyers active across all industries especially as they look for a healthy ROI on middle market companies.  Here is what Bain found in the course of their research:

Deal practitioners are prepared to take advantage of this moment. Bain surveyed around 300 M&A executives globally about their outlook and priorities for dealmaking in 2023. Respondents anticipate closing a similar number of deals, if not more, in the year ahead, encouraged by more attractive asset availability and decreased competition. They express confidence in the ability for M&A to create value. Nearly two-thirds of respondents report that acquisitions completed in the previous three years have met or exceeded expectations.

As for 2023, Bain identified five M&A trends to watch for in the year ahead:

  1. Cash-rich companies making strategic, bold moves.
  2. A continued prevalence of small to midsize deals.
  3. A balance of scale and scope deals.
  4. Valuations coming under further pressure.
  5. Companies reshaping portfolios through separations and divestitures.

I have highlighted the first two of these five because they pertain directly to our clients and what we anticipate for them this year. As the Sage of Omaha, Warren Buffet, has wisely stated:

Be fearful when others are greedy. Be greedy when others are fearful.

2023 will be seen as a time when wise investors made bold strategic moves indeed. But they can only make those moves if sellers are not shrinking from the opportunities afforded to them during this time. Often a lack of seller’s is the only thing that constrains active buyers.

So, if you have a written exit plan, continue to follow it. If you lack a plan, attend a Generational Growth and Exit Strategy Conference near you.  While there you will become acquainted with all the options available to you for a planned, strategic growth and exit plan.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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