Key M&A Trends Q4 2023

Tristan Rice shares SI Partners' view of the latest trends we are witnessing. Dive into the detailed review for an in-depth understanding of the evolving M&A landscape.


Q4 M&A update in full 

M&A Demand Surpasses Expectations in Lower to Mid-Market Segment

In our last update, I talked about how M&A demand was actually much higher than the headlines were suggesting, particularly in the lower to mid-market in terms of scale: companies with 5 to 50m revenue.

We’ve now seen clear evidence of that over the past couple of months, with a slew of marketing and tech service deals announced that have been in process since the first half of the year. And the trend seems to be pretty consistent across geographies. 

So far this year, SI Partners has closed deals in the US, UK, Canada, Germany and Australia.

And while we’re inevitably seeing much less interest in Chinese targets today, fast-growing economies such as India and Saudi Arabia are becoming higher priority markets for a lot of buyers and investors.

Emerging Focus in M&A: High-Value Consultancy for Regulated Industries

One fascinating trend that is gaining significant momentum is the interest in high-value consultancy models – companies that provide expert advice to the Boards of large organisations in highly regulated industries, as well as global corporations in the cross-hairs of governments, regulators and activists. That includes consultancies providing advice on topics like risk, compliance, ESG, strat comms, political & economic intelligence and investor relations.

Shifting Dynamics in M&A: High Competition, Cautious Investments, and Active Marcoms Sector

The current level of M&A activity in this segment is virtually unprecedented, with competition and multiples reminiscent of the post-Covid scramble for digital marketing and transformation agencies.

Speaking of which, we’ve seen much more caution on M&A from management and technology consultancies. Having invested heavily in digital transformation skills over the last few years, they’re now seeing a slow-down in client spend, and they still have some right-sizing to do.

But in the meantime, Marcoms buyers are accelerating their M&A plans and it’s not just the PE-backed platforms. Publicis, Havas, Omnicom and Stagwell are all actively buying, and for sellers that can navigate the corporate machine, their rosters of global clients can represent an attractive growth opportunity.

As well as acquisitions, they are also making disposals, partly to raise cash in a high-cost-of-capital environment. Stagwell in particular recently generated $245m from the sale of its healthcare business, ConcentricLife, to Accenture.

2024 M&A Outlook: Navigating Profitability and Sustainability Amidst Global Uncertainties

So as we look ahead to Christmas and the dawn of New Year, what does 2024 have it store for us? Well, the consensus seems to be that M&A activity is likely to increase over the next few months. There’s increasing optimism that we’re over the worst of inflation and interest rate rises, but on the flip side, geopolitical turmoil is creating more uncertainty.

Prioritising Profit and Sustainability in M&A Deals

Through all of this, one thing is clear: profit and margin sustainability are more crucial than ever to a successful sale. Gone are the days when profit was tomorrow’s problem and the focus was just on growth and scalability. Now buyers and investors look for targets that can ride out shocks and sustain positive cash flows whatever the world throws at them.

And sellers should expect that scrutiny to continue throughout the deal process, right up to closing. So understanding how to prepare and where to focus management time and attention during that period has never been more important.