In July 2022, our Lloyd's of London syndicate launched a survey on the topic of M&A transactions and over 650 brokers responded with their thoughts. No doubt, the sentiment around deal making in 2022 is very different from that of 2023. Nonetheless, we thought we’d share some interesting data points as we look ahead into the new year!

• 38% of surveyed brokers had clients looking to sell their business in the next 12-24 months. (*This equates to at least 247 M&A transactions which brokers were exposed to.)
• The majority of these transactions involved SME businesses: 63% had an annual revenue of sub $15M, 17% were sub $50M and 9% were sub $100M.
• The top sectors where brokers expected deals were manufacturing (24%), technology (22%), retail (20%), healthcare (7%) and finance (6%).
• 61.5% of surveyed brokers had less than 5 clients looking to sell their business each year, 18% had 5-10 and 3.3% brokers had over 10 per year.

Granted, the M&A landscape has shifted drastically since the first half of 2022, so you might be wondering – are these statistics still relevant? Earlier this year, we commented on the inevitability of an M&A correction due to rising interest rates, geopolitical trends and global recession fears. However, we remain optimistic that the SME M&A market can still present a great opportunity for brokers.

According to Willis Towers Watson, the fear of recession could trigger a ‘lipstick’ effect, with buyers focusing on smaller deals and larger deals falling out of favor. Along the same lines of thought, here at CFC we predict that some private equity investors will turn to the SME segment for growth due to more cost-effective opportunities, lower risk profiles and digestible equity commitments.

CNBC also commented that the tech sector could see a flux of M&A activity as digitization continues to ramp up across all industries, which aligns with our survey findings. On the other hand, persistent supply chain disruptions could also fuel M&A as companies look to increase operational resilience.

Overall, while the M&A market will continue to face headwinds in 2023, there is still substantial opportunity for insurance brokers especially in the small and micro end of the M&A market. CFC’s first to market, award-winning transaction liability private enterprise (TLPE) policy gives brokers with little to no experience in M&A insurance the opportunity to dip their toes into the SME M&A world.

If you have any questions regarding M&A insurance for small business sellers, get in touch.

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