Bridging the Way BayState Business Brokers blog

Our M&A Outlook for 2024

by | Jan 29, 2024

As we settle into the New Year, we look ahead with much optimism. The pandemic is in the rearview mirror and businesses are back to business, with some sectors exceeding pre-COVID performance. Interest rates are expected to decline this year as the Federal Reserve holds steady. It looks as though 2024 could be a ‘normal’ year in many ways, as well as a year of growth.

Between individual, strategic and private equity buyers, there are many buyers looking for solid businesses to buy. Healthy companies are still commanding strong multiples, and we expect this will continue in 2024.

Baby Boomers and the Market

Baby boomers are a key driver for business sales as we see this age group look to retire or sell their business to do something new. As Americans continue to live longer, boomers are open to new adventures and challenges as they embrace the idea of cashing in on the business they have worked at for so long. Many of these owners were delayed in selling their companies due to COVID. Now that their business has stabilized for 1-2 years, owners are ready in 2024 to sell the company and retire.

An important trend affecting many baby boomers is discovering that the next generation is not interested in working in the family business. Instead of succession planning, many boomers are faced with the difficult and emotional decision of opting to sell a business that has been in the family for many generations.

At BayState Business Brokers, we specialize in selling family businesses and understand the emotions around selling a multi-generational company to an external buyer instead of keeping it in the family. Experience and empathy are paramount to skillfully guiding and supporting an owner going through the process of marketing, selling and transitioning ownership in this situation. The skills to effectively support and counsel both the owner and the family are unique and essential for a successful outcome for all.

Deal Structure

Deal structure is becoming a more critical aspect of putting a successful deal together, and that will not change in 2024.

With deal structures becoming more complex, with more sophisticated buyers, it is important to work with a knowledgeable business broker who understands deal structure and various options available to get and keep a deal together through closing. Seller financing, escrows and retaining some equity are becoming more prevalent in deals, which can provide a tax advantage for sellers and bridge a valuation gap. With seller financing, sellers can offer slightly lower interest rates than traditional lenders to enable a deal to come together, while making more money in the end through charging interest. A seasoned business broker who understands deal structure and its importance in negotiating terms and bringing deals together is invaluable in today’s market.

Taxes

Another factor affecting business owners deciding to sell is the significant limitation to the Federal unified gift and estate tax exemption scheduled to take effect at the end of 2025. Current income tax rates are also set to sunset at that date, leaving open the possibility of higher taxes moving forward. Many owners who are looking to sell in the next few years should strongly consider selling in 2024 and 2025 to avoid a potential increase in their taxes on sale proceeds or on the income they derive from their business.

Financing

Choosing the correct lender can make or break a deal. In 2023, with many banks changing their lending parameters, we found it more difficult for buyers to know which banks to work with to execute a successful transaction. BayState Business Brokers has close relationships with many small business administration (SBA) and conventional lenders who are offering financing, meaning security that the deal will close and more money for the seller at closing.

The SBA is waiving fees for deals under one million dollars, which presents a great opportunity for individual buyers acquiring smaller companies. BayState Business Brokers works with experienced SBA lenders for loans up to five million dollars and conventional lenders who provide financing for larger deals up to 25 million dollars.

Experience and Knowledge Remain Important

Buyers and sellers consistently rely on valued trusted advisors when contemplating selling or buying a business. Attorneys, accountants, and wealth managers are typically included in such strategic discussions to help the seller or buyer consider options, timing, risks and benefits. We appreciate the opportunity to partner with our clients’ advisors so we can truly deliver a “minds around the table” approach during what is typically the most important transaction of a client’s life.

We take great pride in each of our broker’s breadth of industry experience, and that most of our brokers have worked in or grew up in a family business. The values learned by working in a family business last a lifetime and enable us to offer insight and understanding to our clients that can’t be taught.

If you have a client who is thinking about selling or buying in 2024, we welcome the opportunity to speak with you and them to discuss more specifics about the market and their industry and the pulse of individual buyers and industry buyers who we regularly speak with.

We look ahead with excitement and optimism and welcome the opportunity to speak with you and your clients as to how BayState Business Brokers can help make 2024 a great year.

Contact us.

Archives

Steps

Time to Sell Your Business?

Contact our experienced, knowledgeable and passionate business brokers to achieve your goals.

Call us at 617-562-5700 or Contact

Hands

Looking to Buy a Business?

Work with one of our experienced business brokers with local market knowledge and industry knowledge.

Call us at 617-562-5700 or Contact