Recent M&A Activity: Top 3 Reasons Why We Are In a Seller’s Market



          M&A activity has hit new records in 2021, according to KPMG, and looks to continue those trends going forward in 2022. While there are other factors to consider when selling your business, these are some that you certainly won’t want to ignore. Three main reasons are causing these M&A industry trends. There is a ton of liquidity in the United States right now, coupled with low interest rates that make it cheap to borrow, and the increase in strength in financial and strategic buyers.


Liquidity is the ease at which an asset or security can be converted to cash. Naturally, cash is the most liquid asset there is. Without getting into the weeds too much, the United States started a Quantitative Easing program in 2020 in response to the global pandemic. This increased the money supply in the country because the government is buying back bonds and other types of assets such as mortgage-backed-securities (MBS), which in turn puts cash back into the original bond-holders’ hands. What we’ve seen because of this is assets rising in value dramatically, including businesses. Businesses are trading at some of the highest multiples they ever have recently.

 This is easy to see in the public sector with companies like Tesla with a price-to-earnings (PE) ratio over 1,000 at certain times last year. But we have also seen this in the private sector too. As we’ve always said, quality businesses that are built to sell will always sell in the M&A market, many for maximum value and more due to higher multiples. Private equity firms, investment banks, family businesses and others are flush with investable capital and are moving down market to acquire businesses, and high liquidity makes it easier.

Low Interest Rates

For many years, interest rates have been much lower that we’ve seen in the past. Since 2020, interest rates have been at historic lows. When interest rates are low, that means it is much cheaper to borrow money to finance a business or, in the M&A market, to use debt to buy a business.

As discussed in a previous article, many deal structures involve the buyer borrowing money for part of the acquisition price or sometimes for the entire purchase. The buyers will secure an SBA or other loan facility to come up with the cash business owners are owed at the time of close for the sale of their business. When the buyer doesn’t have to pay as much interest for a loan, that makes them more eager to hunt and search for deals. If the buyer is getting a cheaper loan, that can also translate to more money in your pocket as the seller.

Increase in Strength of Strategic & Financial Buyers

          With the stock market hitting all-time highs during the pandemic, many strategic acquirers were positively affected from an increase in share price. Even private strategic acquirers benefitted from the low interest rates we just discussed. The combination of a healthy stock market, liquidity, and low interest rates gives strategic acquirers an incentive to buy companies. Whether they are using equity, loans, or cash, now is a great time for them. This is great news for a seller, because if the buyers are eager to buy, you will be a hot commodity.

          Private equity firms, investment banks and businesses are sitting on more cash than ever before. With all that capital, there comes pressure to deploy it from executives and partners in the firm to fuel inorganic growth and ensure a favorable return of investment. The number of private equity firms is currently growing as well. Both factors combine to create an incredible seller’s M&A market, like we have seen in 2021. As we like to say, there is a lot of dollars out there chasing too few of deals.


M&A activity has been growing for the past 8 years, but last year showed a dramatic increase in activity due to increased liquidity and low interest rates, as well as an increase in the strength of buyers, financial and strategic. As a business owner, it is certainly worth having a discussion with one of Final Ascent’s M&A advisors on whether you are ready to sell your business. You may hear a valuation higher than you were expecting.