Will M&A be hot or cold in 2023?

Saturday Send! The GovCon M&A Blog from sbLiftOff

We get this question a lot. So, we thought we should answer it. Maybe. Rather watch than read? Click here to watch a video instead.

The M&A market has been hot and cold over the last several years with ups and downs in deal volume. However, the market has mostly been hot, with 2018 and 2019 being considered very strong years for M&A. In 2020, when COVID hit (remember that?), there was concern that the M&A market would collapse, but that’s not what happened. After a few short months, deal volume came back online leading to 2021 becoming the hottest year for M&A in decades. Although 2022 saw a slight drop relative to 2021, it was still a strong year being equal to or greater than 2019.

There are several reasons why the M&A market is expected to remain strong in 2023. The amount of capital looking to be used is quite high. Private equity firms, venture capitalists, and strategic buyers are all looking for opportunities to invest in (yes, there are even some tire kickers out there – more on that for a different Saturday). In the privately held market, there’s a growing recognition that companies with under $100 million in revenue offer tremendous growth opportunities for buyers.

Another factor driving M&A activity is a generational shift in ownership. Many people who formed their companies in the 80s, 90s, and early 2000s are getting ready for retirement and looking to transfer their legacy. These owners are often looking for a buyer who can take over the business and continue to grow it, while also providing a good return on their investment. This creates an attractive opportunity for buyers who are looking to acquire a company with a solid foundation and potential for growth.

In short, 2023 is going to be a strong year for GovCon M&A.