To commemorate Class VI’s 20th year, we’ve been revisiting some highlights from the last two decades. But with this writing, I wanted to turn to the future and try a little predicting for you (fortunately, none of this shows up on Polymarket!). After all, much of my job as CEO is trying to develop strategies to succeed in a range of scenarios.
So what will happen in the M&A space over the next 20 years? Here’s my attempt at an answer, broken into a few themes.
AI ascendant
Maybe you’re sick of hearing it, but artificial intelligence is big and only getting bigger.
AI’s rise may turn out to be one of the defining technological stories of this century. Given the rapid pace of innovation, I won’t even hazard a guess about the capabilities available to businesses in 2045.
But I do know that these developments will be impossible to ignore. Companies risk being left behind if they aren’t already investing in AI solutions to make their workflows more efficient and effective. Already, M&A investors are wary of buying any firm that doesn’t have a solid AI strategy in place—why sink money into an asset that isn’t preparing for the future?
M&A advisors also need to be AI-capable to stay relevant. I have asked my team to focus AI efforts on the work that’s the most repetitive, the most frustrating, and the least educational. Freeing ourselves from the mundane will let us devote even more time to delivering a world-class level of service as only humans can, with empathy and insight drawn from long experience.
Because in the end, almost nobody selling a middle market or large business will be comfortable putting all their faith in a faceless technological tool. For example, an experienced deal team knows what it feels like to undergo due diligence and how to best express that to an apprehensive seller. Only people can give this kind of reassurance and demonstrate the necessary creativity, interpersonal rapport, strategic thinking, and leadership. The future of M&A will be a combination of the machine and human.
Private capital markets expand
Private equity has grown rapidly over the past decades, and I expect this trend to continue.
Big institutions like pension funds, endowments, and insurance companies should continue to tap private markets. And the SEC’s recent rule changes make it easier for high-net-worth individuals to invest in private equity.
The shift to private markets is good for anyone selling a business. Simply put, there’s more capital available to compete for those businesses, which tends to drive up valuations.
On the wealth management side, advisors will need to expand their capabilities to be able to assess private investments based on more limited data than is typically available in the public markets. Their clients may be interested in private credit or equity opportunities, so advisors will need to help them understand the nuanced risk profiles of private investments with more limited information. This will be tricky as it requires years of experience working with private companies.
The senior boom is coming
By 2045, nearly all Baby Boomer entrepreneurs will have exited their businesses. Between now and then, M&A advisory firms are going to be busy helping these owners retire.
A large percentage of these companies will pass to younger family members. But if even one-third of Boomer founders sell to third parties as expected, that’s still an extraordinary number of transactions in the coming years.
We at Class VI are excited to help execute this wave of transitions by offering pre-transaction preparation assistance, experienced deal outreach teams, and post-retirement wealth management services to help owners meet their financial goals.
US exceptionalism – will it continue?
Finally, I’m cautiously optimistic that the U.S. will get its fiscal house in order—at least enough to avert disaster. I am also hopeful that AI delivers enough productivity gains to fuel accelerated economic growth to help alleviate our debt challenges. The US has prospered because of our focus on entrepreneurship and a unique capital allocation system geared towards financing lots of business innovation. Provided we keep this as a priority, we will have the opportunity to grow our way out of our current debt challenges.
I worry a lot about the U.S. debt picture – continuously expanding debt will increase borrowing costs to the detriment of M&A. Our political system clearly wasn’t set up to efficiently handle complex problems like the looming debt crisis, but I’m confident everyone recognizes the importance of keeping the dollar as the world’s reserve currency. Without that status, we could be in for some rough years. Warren Buffet always said he would bet on the US ten times out of ten – let’s hope he is right for the next 20 years!
Let’s reconvene in 2045
A lot can happen in 20 years—after all, the last 20 brought us Y2K, the Dot-Com bust, the 2008 financial crisis and the COVID pandemic. But no matter what happens to M&A in the next two decades, I can guarantee there will be few dull moments.
Do you think my predictions will play out as written? We’ll have to publish a follow-up to grade my performance after opening this time capsule!
AUTHORED BY:
Chris Younger | CEO | Class VI Securities, LLC | Class VI Family Office, LLC
Chris co-founded Class VI in 2005 with a mission to Enable the Entrepreneurial Spirit. Sharing a passion for what entrepreneurs mean to our community, Chris and his business partner David Tolson felt they could do a better job for business owners and have had a great time helping clients ever since.
Prior to Class VI, Chris spent more than 20 years gaining experience in executive management, marketing, sales, law, and mergers and acquisitions.