M&A in 2024: our predictions for the year ahead
In the first of a series, Gregg Pendlington from Dow Schofield Watts North West corporate finance team outlines the prospects for the deals market in the next 12 months and identifies some key trends.
- The outlook is brighter.
The deals market is cyclical by nature. Following the bumper period in the wake of the pandemic, rising inflation and, interest rates and other factors began to affect confidence. While deals didn’t stop, in 2023, they took longer to complete with more caution and, therefore, due diligence. With confidence now returning, we expect a good year ahead.
- Twin factors driving deals.
In 2024, the deals market will arguably be driven by two key factors – pent-up demand from buyers and sellers who have held off making decisions until the outlook improves and the prospect of a change of government and a possible increase in capital gains tax.
- The ‘holy grail’ for buyers.
Throughout 2023, buyers have been selective and sought the ‘holy grail’ of maximum returns with minimum risk. As demand increases in 2024, businesses offering these twin benefits can create a fundamental competitive dynamic for themselves.
- Importance of repeat custom.
Buyers will be looking for evidence of recurring revenues – not just software businesses with a subscription model, but also those who can demonstrate repeat business and customer ‘stickiness’ and longevity.
- Green is good.
ESG continues to be high up on the agenda. Given the decarbonisation schedule and greater consumer awareness, genuine ‘green’ businesses such as environmental and alternative energy firms will be sought after. Aside from the environmental aspect, strong social values and corporate governance are desirable and show a high level of investment in the business.
- Now is the time to re-engage.
In a complex deals environment, buyers will likely remain cautiously active in the year ahead. However, we are detecting an underlying sense of optimism and signs that the market is again beginning to flow. Those companies putting off transactions would be well advised to re-engage now and maximise the opportunities ahead.
Gregg Pendlington, DSW CF Partner