Rising interest rates and record inflation stifled mergers and acquisitions last year, leading to an 18% drop in activity compared to 2022 for Central and southeastern Pennsylvania, according to a report this week by accounting and professional services RKL LLP.
- Lancaster and the capital area bucked the regional decline, which reflected the national scene.
- Nonetheless, M&A activity was below pre-pandemic levels, according to the report.
- “It’s kind of as we were expecting,” said Bryan Redding, practice leader for transaction advisory services at RKL LLP.
What were the numbers: There were 389 deals last year in the region encompassing Central PA, the Philly area and the Lehigh Valley, down from 476 in 2022.
- The capital region accounted for 56 deals, up from 43 in 2022 but well below the 74 deals in 2021.
- Lancaster saw 32 deals, up from 30. The figure was 34 in 2021
- Greater York, which also includes Adams and parts of Cumberland and Franklin counties, recorded 19 deals, down from 23 in 2022 and 25 in 2021.
- RKL LLP counts deals when they include a local buyer or a local seller or both.
- Lancaster had the most in-market deals, at five. There were four in the capital region and three in greater York.
What about private equity: It’s played a growing role in recent years, rising from involvement in 38% of total deals in 2019 to 51% in 2022.
- But the increase stalled in 2023, with private-equity firms active in 50% of regional deals last year.
- They were likely deterred by rising interest rates, which made borrowing for acquisitions more expensive.
- “A lot of private-equity firms took last year off,” said Bob McCormack, managing partner of Murphy McCormack Capital Advisors, an M&A advisory firm in Lewisburg.
- Potential sellers also took a breather last year as they adjusted to the impact of inflation.
- “Sellers want to go to market with their trends and their business performance heading in the right direction,” Redding said. “There was some choppiness in 2023 and some businesses experiencing some downward trends.”
What about 2024: It’s off to a healthy start, Redding and McCormack said.
- Businesses are shaking off inflationary pressures and private-equity firms still have money to invest.
- Demographic trends, meanwhile, remain favorable.
- “There are still a lot of baby boomers out there that have not figured out their succession,” McCormack said.
- Potential headwinds include reduced appetite for lending among banks and uncertainty heading into the presidential election this fall, he added.
