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Mid-Market Mergers and Acquisitions Industry Outlook for Q3 2024

April 19, 2024

In the dynamic landscape of mergers and acquisitions (M&A), the mid-market segment continues to be a focal point for deal-making in the United States. As we plunge into the third quarter of 2024, several trends are clearly reshaping the M&A landscape, influencing the strategies of businesses seeking growth opportunities, investors scouting for lucrative deals, and advisors guiding them through the process.

Let’s delve into the latest forecast for the mid-market M&A industry for 2024 and explore the opportunities and challenges that lie ahead.

Resilience Amidst Uncertainty

Despite economic fluctuations and geopolitical tensions, mid-market M&A activity in the United States remains resilient. Businesses are leveraging M&A as a strategic tool to achieve economies of scale, diversify revenue streams, and expand market presence.

Technology-Driven Deals

Technology continues to drive M&A activity, with companies seeking to enhance their digital capabilities, accelerate innovation, and capitalize on emerging trends such as artificial intelligence, blockchain, and cybersecurity.

We anticipate a surge in tech-focused mid-market deals as businesses prioritize digital transformation to stay competitive.

Industry Consolidation and Vertical Integration

Amidst evolving consumer preferences and competitive pressures, industries across sectors are witnessing consolidation and vertical integration. Mid-market players will pursue M&A as a strategy to achieve economies of scale, expand market share, and enhance operational efficiency.

Strategic acquisitions aimed at acquiring complementary businesses, securing supply chains, and diversifying revenue streams will be prevalent, particularly in sectors ripe for consolidation.

Focus on Sustainability and ESG

Environmental, Social, and Governance (ESG) considerations are gaining prominence in M&A decision-making. This trend is being driven by investors, consumers and regulators placing greater emphasis on sustainability, ethical business practices and corporate responsibility.

As a result, mid-market players are increasingly incorporating ESG criteria into their due diligence processes and seeking acquisitions that align with sustainability goals.

Healthcare and Life Sciences a Hotspot

The healthcare and life sciences sector is expected to continue being a hotspot for mid-market M&A activity for the remainder 2024. Factors such as demographic shifts, technological advancements, and regulatory reforms are driving demand for healthcare services, pharmaceuticals, and medical devices.

Mid-market companies in this sector will pursue acquisitions to enhance product portfolios, access new markets, and capitalize on opportunities arising from the convergence of healthcare and technology.

Private Equity Activity

Private equity firms continue to play a significant role in mid-market M&A, leveraging ample capital reserves and seeking attractive investment opportunities.

We anticipate heightened private equity activity across diverse sectors, with a focus on value creation, operational improvements, and exits through strategic sales or IPOs.

Cross-Border Transactions

Despite geopolitical complexities and regulatory challenges, cross-border M&A remains a key driver of growth and globalization.
US mid-market companies are exploring international expansion opportunities through acquisitions, joint ventures and strategic alliances, particularly in emerging markets with favorable demographics and growth prospects.

Flexible Deal Structuring and Financing

In the wake of economic volatility and evolving market conditions, deal structuring and financing strategies are evolving. Sellers are adopting flexible deal structures – including earn-outs, contingent payments and equity rollovers – to bridge valuation gaps and mitigate risks.

Additionally, alternative financing sources such as mezzanine debt, venture debt and asset-based lending are gaining traction, providing additional capital options for mid-market transactions.

Challenging Regulatory Landscape

Regulatory scrutiny continues to shape the M&A landscape, particularly in sectors deemed critical to national security and public interest.

Heightened antitrust enforcement, data privacy regulations and geopolitical considerations are influencing deal negotiations, valuation assessments and integration planning for mid-market transactions.

M&A in 2024 Requires Foresight, Strategic Planning and Agility

As we look ahead to the final quarter of 2024, the mid-market mergers and acquisitions industry is poised for innovation, growth, and transformation. By leveraging technology, embracing ESG principles, pursuing strategic acquisitions and navigating cross-border complexities effectively, mid-market players can capitalize on emerging opportunities and drive value creation in an ever-evolving M&A landscape.

With foresight, agility and strategic execution, businesses, investors and advisors can navigate the opportunities and challenges that lie ahead and unlock the full potential of the mid-market M&A ecosystem for the remainder of 2024 and beyond.