ACG Chicago Panel Predicts Year’s M&A Challenges
Though they anticipated a strong year for M&A, panelists highlighted potential tariffs and continued high interest rates weighing on dealmakers’ minds
On a cold January morning, panelists at ACG Chicago’s Market Trends breakfast took the temperature of the U.S. economy and the M&A marketplace. While predictions for dealmaking and GDP growth were upbeat, inflation concerns and other pressures lingered.
“The middle market is ripe with opportunity, especially across the supply chain and logistics sectors…We anticipate a dynamic year ahead as businesses and investors navigate an evolving economic landscape,” panelist Nicholas Antoine, cofounder and managing partner at Red Arts Capital, told Middle Market Growth following the panel.
We recapped key predictions from panelists below.
Dealmakers are eager to get back to work. Panelist James Chiarella, COO and managing director of debt capital markets with Piper Sandler Finance, said that he sees M&A coming back strong in 2025, pointing to the large number of M&A transactions launched after Federal Reserve rate cuts late last year. “You can’t change our DNA. We’re all deal people and there was a lot of impatience that built up over the course of 2024.” he said. “We’ve seen a lot of closings already in the first four weeks of January, so I think my takeaway is that people have had enough of waiting around and they’re ready to get to work.”
Event Recap
WHAT: ACG Chicago Market Trends panel
WHERE: J.W. Marriott, Chicago
WHEN: Jan. 28, 2025
THE TAKEAWAY: Panelists said the M&A market is poised for a comeback—but labor shortages and inflationary pressures create some headwinds.
With post-election clarity, there will be a push for exits. Dealmakers aren’t the only ones growing impatient: Investors will be looking to grow the top line and funds will feel the pressure to get distributions in the hands of their LPs, panelists said. However, that doesn’t mean there won’t be an appetite for continuation funds—and thus longer hold periods—in some quarters: “[Continuation funds are] an opportunity in scenarios where the valuation metric just hasn’t lined up yet and there are some shareholders that want to stay, but there are a lot of LPs that are looking for liquidity, and that vehicle allows you to make that decision,” Chiarella noted.
Interest rates will go down—but slowly. Jeffrey Korzenik, chief economist with Fifth Third Bank, took a conservative view on rate cuts. Pointing to stubborn inflation and potential inflationary policies from the Trump administration, among other challenges, he expects only two 25-basis point interest rate cuts in 2025. But Chiarella was more bullish, saying he saw both inflation and interest rates coming down a little faster than the consensus view.
Valuations aren’t like to rise, but will remain healthy. While valuations are likely to remain somewhat suppressed by the interest rate environment, the panelists didn’t expect this to stand in the way of dealmakers. “We can do a lot of business with valuations right here as long as we’ve got the buyers and sellers matching, and they’re starting to cross, so I think that’s a perfectly healthy environment,” said Korzenik.
Labor challenges will remain a major obstacle for businesses and the economy as a whole. Korzenik noted that the ongoing labor shortage, exacerbated by anti-immigration sentiment, was likely to cause major issues in 2025 and beyond. “[The labor gap] not only holds back potential growth in the United States, it drives wage inflation up, and wage inflation, unless you can offset it with enough productivity growth, drives real inflation and core inflation,” he explained.
The ACG Chicago Market Trends panel was sponsored by Seyfarth and Chartwell.
Hilary Collins is ACG’s Associate Editor.
Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.
