‘Selective growth’ in M&A activity predicted for second half of 2024, Cetingok says  

DALLAS—While market conditions might be conducive to increased M&A activity in the security space this year, not so fast, says Alper Cetingok, senior managing director for Raymond James & Associates.   

Cetingok’s M&A forecast for the last six months of the year sees buyers remaining more selective, while some sellers are delaying processes due to market conditions and persistent gaps in valuation expectations.  

“We're going to see some growth, I think, in the second half of the year,” said Cetingok, who discussed the latest M&A trends and developments in the security industry during his session at PSA TEC 2024 titled, “Navigating the Currents – A Comprehensive Update on M&A Trends in the Security Integration Industry.” “It's going to be selective in many cases. The businesses, not surprisingly, that are going to have resiliency and have strong, durable margin profiles that are typically not cyclical in their orientation are the ones that are being preferred.”   

Factors influencing M&A  

Cetingok delved into various factors influencing the current M&A environment. He pointed out that the backdrop for transaction activity in 2024 is more positive than last year, but also noted that concerns regarding both economic and geopolitical impacts create uncertainties that will persist throughout the year.   

In terms of economic conditions, there was slow growth in real gross domestic product (GDP) at an annual rate of 1.6% in the first quarter of 2024, Cetingok said, adding that despite inconsistent economic data, optimism of a “soft landing” persists.   

“Everyone knows the Feds are trying to slow growth through rate increases, so we've seen the cost of capital go up significantly as a consequence,” he explained. “I think we're finally on the other side of that, and we do believe that you’ll start to see rate cuts.”   

Strategics reign 

Regarding strategic activity, Cetingok explained that strategic buyer participation in M&A has been “highly targeted,” and that buyers with strong cash positions and equity values – citing Securitas and other operating companies as examples - are likely to deploy capital and accelerate growth via M&A.   

“They're going to be much more influential over the course of the next several years,” he said. “Their cash positions are very strong, and their equity values are actually quite strong, as well. Those lend themselves very nicely to doing more and more M&A.”   

PE acceleration 

Cetingok noted that private equity (PE) activity decreased significantly in 2023, but he predicted a moderate increase in 2024 as spreads begin to tighten with an improved economic environment.   

“You can't have a conversation about M&A without talking about private equity extensively,” he said. “PE activity moderated for sure in 2023, but we do see signs that that's going to accelerate through the balance of 2024 and beyond.”   

Optimism ahead 

From a financial standpoint Cetingok noted that the anticipation of rate cuts during the balance of 2024 has created optimism and increased activity.  

“We've gone through some turbulence, of course, over the years, but the constant has been this industry has been consistently growing in stature, in terms of the attention being paid from the financial community,” he said. “We're seeing more and more capital deployed into the market at larger amounts than ever before.”