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Trend

The Resurgence of SMB M&A

The landscape of small and medium-sized business (SMB) acquisitions in the United States has undergone significant transformation over the past few years.

Economic, technological, and demographic factors have created a fertile ground for mergers and acquisitions (M&A) in the SMB sector.

The economic recovery following the COVID-19 pandemic has created a favorable environment for SMB acquisitions.

The economic recovery following recent global disruptions (i.e COVID) has created a favorable acquisition environment. Buyers are strategically adjusting their approaches to capitalize on a growing supply of sellers, reshaping deal structures and investment strategies.

As businesses stabilize, buyers have increased confidence to invest in acquisitions.

The rapid advancement of technology, particularly in areas like artificial intelligence and digital payments, has made it easier for SMBs to operate efficiently and expand their reach. This has increased the attractiveness of SMBs as acquisition targets.

Demographically, many SMB owners are reaching retirement age, creating a wave of businesses entering the market for sale. This shift has led to an increase in available acquisition opportunities, as owners seek to transition their businesses to new leadership.

The pandemic was also a reality check for the aging population of business owners, 40% of whom now want to pass their businesses on to the next generation as they move into a new phase of life.

There is a growing trend of individuals becoming entrepreneurs by acquiring existing businesses rather than starting new ones from scratch. This approach, supported by favorable lending programs like the SBA 7(a) loan, allows entrepreneurs to bypass the initial challenges of starting a business and take over established operations.

Investors are increasingly interested in SMBs due to their potential for growth and scalability. The lower-middle market, in particular, offers attractive opportunities for investors looking for reasonable prices and long-term ownership.

As this trend continues to evolve, it presents numerous business opportunities for investors, entrepreneurs, and service providers.

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