As the environment is constantly evolving it has become essential for businesses to constantly search for the next big deal. Yet, in 2024, merger activity appears to have decreased somewhat, and the appetite for acquiring large companies has become more of a snack than a meal. With market instability making the rounds, it is not surprising that business owners have some cold feet ready to start new projects.
The deal And The Deal Scene in 2024
The market for mergers and acquisitions has slowed in the U.S. with only 6,245 deals announced this year to date. Conversely, it will be 13% lower than that depicted in the year 2023. But here’s the twist: Well, it’s not that the number of deals is falling, but that the value of these exchanges has risen! Else, this year’s deals are worth $966.5 billion! This is a 24 percentage point increase over the previous year.
Private equity (PE) deals are also observing a similar trend. There are 10% fewer PE mergers in the U.S., but the dollar value of such transactions is up by 9%, or $291.9 billion. It appears that while the market is slow, there is more impact with deals being done.
Corcentric: An example of an M&A transaction in progress
One of the companies that are on the market in search of a new buyer is Corcentric, a B2B commerce software company from Cherry Hill, New Jersey. Corcentric is like that kid in high school who auditioned for a dance contest twice but never got to dance.
The company tried to go public in the past in 2016 under the name AmeriQuest Business Services, but the company pulled out. They attempted doing so in 2021 with an intention of merging with North Mountain Merger Corp, a special purpose acquisition company at $1.2 billion.
Regrettably, the deal did not go through because of adverse market conditions, and this was in August 2022.
Well, after a year, Corcentric is back to the market for the next owner. Though it will not be in a position to achieve that valuation, that stands at roughly $1.2 billion as it was at the end of 2021.
Orchid’s projection is that even when the company can generate EBITDA of about $50 – $60 million at most, Corcentric can only be purchased for a maximum $500 million.
It is similar to selling a car that was newly manufactured but now a bit used – you may not get the desired price.
Other players are still trying the waters. I would say that the witness testimony of Val over the incident is quite appropriate to show how other players are testing the waters.
Of course, Corcentric is not the only organization to take a dip in the market today. Another company which might be interested in an acquisition include Boston based payments processor Flywire which is also said to be exploring suitors.
Flywire went public during the heat of the IPO rush in 2021, and like many IPOs raised in the period, its shares have fallen below their offering price. Currently, the company’s market capitalization is estimated at around $2.3 billion, but it is still feeling its way in the waters , however, the company has not taken any official moves.
Another company that can be considered to be in the potential search for a buyer is Ncontracts that provides governance, risk, and compliance management services. Ncontracts was established in 2009, and its customer list grew over the years, it also engaged in acquisitions. It can be sold for up to $400 million that will significantly benefit the company.
This is like in the Monopoly board game when one of the players buys all the properties and the buildings, and then relishes in his spoils.
The Uncertain Road Ahead
Once again, it is possible to observe certain indications of M&A activity, though it is quite obvious that it will be going forward. Market risk and perceived potential loss in economic growth rate reduce business and investment.
