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The Dynamic M&A Landscape for Family-Owned Businesses in Q3 2023

The current state of Mergers and Acquisitions (M&A) as we transition into the third quarter of 2023 remains fascinating, yet fraught with complexities. The market exhibits an extraordinary dichotomy, with robust private equity capital ready to be deployed on one side and signs of economic uncertainties on the other.

Family-owned businesses that are contemplating selling in the coming years will find themselves navigating this challenging terrain. It’s a landscape dominated by notable volatility in public equities markets, elevated interest rates, and yet, an enduring supply-demand imbalance with plenty of capital sitting on the sidelines, awaiting investable opportunities.

In response to these dynamics, dealmakers are recalibrating their strategies, seeking to creatively take advantage of the capital available today, while cautiously preparing for the uncertainties that may arise in the future.

Key Trends and Observations

As we delve deeper into the M&A market’s dynamics, several notable trends surface.

  1. Fast-Moving Buyers are Winning: In an unpredictable economic landscape, sellers are prioritizing speed and certainty in closing transactions. While securing a premium valuation remains crucial, there’s an increasing focus on buyers who can expedite the process. Sellers are narrowing down serious buyers who match their management style and can ensure a swift sale completion. On the flip side, buyers are selective, choosing targets that warrant their resources, knowing they must outshine on both value and speed.
  2. Due Diligence is Extending: Sellers are keen on streamlining the due diligence process. However, as buyers exercise caution amidst the uncertain economic conditions, due diligence periods are extending. Buyers are scrutinizing every potential risk throughout the process, and in some instances, revalidating findings from third-party diligence streams before closing. As a result, sellers are expediting information sharing to curtail this elongation.
  3. Reduced Access to Leverage for Financial Sponsors: With financial leverage becoming less abundant and financing terms worsening, financial buyers are more cautious with their commitments. They are considering refinancing post-close as a potential strategy to work around these constraints.
  4. Preparation for the Unexpected: Buyers are re-introducing the “recession case” into their due diligence process. They want to understand a company’s plan for an economic downturn and gauge its resilience. At the same time, the current market volatility can lead potential buyers to abandon an ongoing process. Here, experienced advisors can unlock additional buyer relationships and ensure deal closure.

Maximizing Value: Top Recommendations

In this environment, it’s crucial to partner with an M&A advisor to increase the likelihood of a successful transaction. Here are the top three recommendations for maximizing value:

  1. Proactive Engagement with M&A Advisors: Engage M&A advisors early on. This allows for strategic preparation, including financial review, operational health-check, and crafting a compelling business proposition.
  2. Effective Communication of Your Business Story: Work with advisors to create a persuasive narrative about your business’s growth potential and resilience. This will attract the right buyers and command a premium valuation.
  3. Strategic Positioning in the Market: Advisors can guide on optimal timing and positioning for your business sale. They can leverage their network to find potential buyers and package your business attractively.

Final Thoughts

As we move forward into Q3 2023, the M&A landscape will continue to evolve in response to ongoing economic uncertainties. For family-owned businesses considering a sale, understanding these shifts and being prepared to adapt their strategies accordingly is crucial.

Navigating the complex M&A market requires strategic foresight, professional expertise, and an adaptive mindset. In the face of uncertainty, opportunities to unlock significant value persist for those who understand the dynamics at play.

At Astria Group, we specialize in aiding family-owned businesses to navigate these complexities and maximize value. Our seasoned professionals provide tailored solutions, ranging from understanding your objectives to developing a robust strategy, and assisting in the execution of the plan. We provide access to our extensive network of investors and potential buyers, ensuring you find the right fit for your business.

Contemplating selling your business in this uncertain climate? Let’s discuss how we at Astria Group can help you maximize your business’s value in the current environment. Our commitment is to guide you every step of the way, ensuring the best possible outcome for your business. Contact us today to explore how we can make a difference for your business in the M&A market of Q3 2023.

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