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Socio-Economic Factors Affecting Market Conditions

M&A Market Conditions

Labor Shortages Impacting M&A

Advisors say that labor shortages have had the biggest impact on deal-making in Q1 2022. In the Main Street market, 92% say its had a negative effect (54% “very negative”). Likewise, 92% say labor shortages are having a negative effect in the lower middle market (47% “very negative”).

More than 80% of half of advisors say inflation, interest rate hikes, supply chain issues, and cost of labor are also having a dampening effect.

Meanwhile, advisors say labor costs (44%) and supply chain costs (30%) are having the biggest net impact on sellers’ net income, followed by gas costs (8%).

On the one hand, labor shortages are helping drive acquisitions right now. Companies are looking to buy skills rather than build them. However, sellers know that talent shortages have constrained their growth. They’re paying more to keep their people, they’re having to turn away work, and they can’t expand like they wanted.

said Lisa Riley, President of Delta Business Advisors, LLC

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