Strong M&A Opportunities Should Continue in 2023

April 10, 2023 | Experts Agree: Iowa's Business Climate is Improving Tom Cavanagh, Vice President & Shareholder, BCC Advisers,

In some years, M&A activity is driven in part by planned or anticipated changes to capital gains or other tax policies that might impact a business owner’s after-tax proceeds received for a sale. At least at this point, that hasn’t been the case in 2023, but it doesn’t make the M&A environment any less interesting. 

One of the challenges in the current market is that sellers are finding it difficult to communicate their earnings expectations due to a range of factors, such as supply chain disruptions, rising wages, inflation, and geopolitical uncertainty. This type of uncertainty often leads to roadblocks in reaching a mutually agreeable valuation for mergers and acquisitions, resulting in a decrease in M&A activity. 

However, despite these challenges, buyers with strong balance sheets are actively seeking acquisitions as a means to achieve growth results, given the lack of organic growth opportunities due to the shortage of employees. We have observed a significant increase in businesses looking to proactively pursue acquisitions, despite concerns of an impending recession later in 2023. If business owners are willing to be flexible with pricing and structure, 2023 could present excellent opportunities for attractive ownership transitions.