Earlier in September, I had the opportunity to attend the 2024 ACG Great Lakes Capital Connection (GLCC) in Cleveland. As always, the event was well-organized and rich in insights, offering valuable perspectives on the state of the middle-market M&A landscape. Over 3 days of speaking with private equity firms, family office investors, and strategic acquirors representing a wide range of industries, some common themes emerged. Here are my top five takeaways:
1. Market Activity Is Gaining Momentum
After a slower start to the year, market activity is starting to pick up, with investors reporting an uptick in deal flow since the end of the summer. Many attributed the earlier slowdown to investment banks holding back deals, hoping for better valuations. Despite a persistent bid/ask gap that has made sellers and their investment bankers reluctant to place businesses in the market for sale, the general outlook for 2025 remains positive, with expectations for a more robust year ahead.
2. Deal Quality Remains Uneven
Investors are encountering a mix of high-quality “A” deals and more average “B” assets in the market. “A” deals benefit from historic growth, sustainable performance, and leading market position. These transactions attract a broader universe of potential buyers and top-tier investment banks offering advisory relationships.
3. Sharper Investment Focus
One of the more noticeable shifts at this year’s GLCC was the precision with which investors are honing their investment theses. Fewer investors are taking an “industry agnostic” approach, opting instead for targeted plays in specific sectors. For example, Environmental Services continue to be a popular focus, though investors were more granular in their discussions, drilling down into sub- verticals within the space. Notably, Landscaping Services emerged as a frequently mentioned sector, with discussions covering both commercial and residential end markets.
4. Mixed Valuation Trends
When it comes to valuations, the landscape is somewhat bifurcated. Premium “A” assets are seeing increased multiples, reflecting stronger competition and demand among investors. On the other hand, investors reported declining valuations for “B” assets, underscoring a more disciplined approach. Many sellers in “B” transactions are recalibrating their expectations through the sale process and, as the bid/ask gap closes, transactions are reaching a successful close.
5. “Broken” Deals Are No Longer a Dead End
Perhaps the most intriguing takeaway from the conference was the conversation around broken deals. While the volume of failed transactions has risen, there’s been a notable shift in how they are perceived. Investors seem more open to reconsidering broken deals, with many eager to reengage and submit new indications of interest. This marks a departure from the more cautious sentiment of a year ago, when remarketing was far less common.
Conclusion
For investors, adapting to the evolving market is key to success. As my discussions highlighted, focusing on sectors with a strong supply of quality businesses but fewer
bidders can yield better outcomes.
For business owners considering a sale, the market remains receptive, especially if your advisor can position your company as an “A” asset. If you’re not yet ready to sell, working with an experienced advisor now can help you prepare for the future and capture maximum value when the time comes.
If you have any questions or would like to discuss these trends further, feel free to connect with me. I welcome your comments.
Investment banking services offered by Forbes Partners, a registered broker-dealer and a member of FINRA and SIPC.
Brooks Crankshaw is Managing Director, Investment Banking at Forbes Partners. He specializes in advising owners of Business Services companies on the sale of their business, growth through acquisition and raising capital.