For years, mergers and acquisitions (M&A) were seen as a growth strategy for only Fortune 500 companies. 

Now, though, nearly three-fourths of all M&A deals involve small or mid-sized businesses. Because of this, entrepreneurs, startup founders, and more have started to embrace this strategy. 

You can see this democratization of deal-making unfold as well. Only 4% of recent M&A transactions exceeded $100 million, suggesting the majority of dealers are now in the small- to mid-market range. 

What Does Modern-Day M&A Look Like?

Back in the day, M&A was looked at as a path to monopoly. Now, though, it’s a tool for innovation and expansion. 

Even smaller companies now pursue acquisitions to adapt quickly to market changes. For example, vertical integrations were once only for huge public companies, but today they’re an opportunity for SMBs to bundle services and gain efficiency. 

Business leaders recognize this as well. 87.8% of businesses cite access to new markets as a primary benefit of M&A. 

Why M&A Works for Startups and SMEs Today

Startup M&A or SME M&A should be considered for many reasons in today’s environment. 

Faster Market Access

First off, buying a company can put your business into new markets or customer segments virtually overnight. 

Instead of spending years to expand organically, a small firm can acquire an established player to target a region or niche instantly. 

Acquiring Talent and Technology

Today’s version of mergers and acquisitions often includes acqui-hiring. This means you receive skilled teams and tech during the M&A. 

Nowadays, technology is becoming more important than ever, especially for AI companies. Therefore, we can imagine tech becoming a bigger part of M&A in the future. 

Flexible Deal Structures and Financing

Another reason why M&A is no longer just for corporations is due to the flexibility in deal financing. 

You now have: 

• Seller Financing: This involves the seller part-financing the deal. For example, the buyer pays a deposit, and the seller receives the remaining balance over an agreed timeframe. 
• Earnouts: These are arrangements where the seller gets paid more only if the business performs well post-sale. Roughly 13% of mid-market deals include earnout clauses. 

• Alternative Financing: Smaller buyers can leverage loans and new financing avenues. For example, U.S. Small Business Administration (SBA) 7(a) loans allow SME acquisitions with just 10% down. Private investors and Sharia-compliant (Islamic finance) funds are increasingly backing SME acquisitions as well.

Current and Future Market Trends

While global deal values hit a record of $5.9 trillion in 2021, they cooled off in 2022 and 2023. 

In 2024, however, 88% of investment bankers reported that mid-market M&A activity outperformed broader market activity, suggesting smaller dealers are increasing overall deal volume. 

We are also seeing new entrants. Micro-pe funds, search fund entrepreneurs, and even startup CEOs are turning into acquirers. For example, startups are performing M&A on other startups on the rise. 

Looking ahead, many M&A advisors (around 79% in one survey) believe that deal flow will increase in 2025 and beyond. A lot of this volume will come from deals under $100 million (approximately 96%). 

Therefore, regardless of business size, M&A is a strategic growth opportunity. When used right, it can help acquire new companies.

Conclusion

It’s no longer just M&A for corporations. M&A is now a viable strategy for startups, SMEs, entrepreneurs, and more. It’s for everybody. 

However, to perform M&A correctly, you need the right strategy and guidance. That’s why we recommended contacting us at OCX Advisors.

We specialize in lower middle-market and Islamic finance compliant Merers & Acquistions and would be more than happy to guide you on your next deal.