The past few years have been volatile, with rising interest rates, inflation, and lots of uncertainty affecting the M&A market. At the New York Smart Business Dealmakers Conference, Bank of America's José Tavarez leads a conversation with Revel's Frank Reig, ChargeLab's Shaun Stewart and Bank of America's Shawn Hoyer on what dealmakers can expect for the remainder of 2024 and beyond.

Here's a lightly edited excerpt:

Shawn Hoyer, Head of Venture Capital Coverage, Bank of America - Investment Banking:

"What we saw during COVID is friction came down and hedge funds, family offices, sovereign wealth funds, everybody started to get into the private capital-raising businesses. And as friction came down, there were a lot of gives. And the pressure to compete by the venture capital firms got bigger. Terms got lighter. I think one of the big challenges that you see with a lot of tech companies today is there have been a lot of disincentives for founders to keep their head in the game and ultimately think about returns to shareholders. There were a lot of businesses that were $20 million in revenue where these founders were taking $50 million off the table because the rounds were so big. Historically it had been you want to give a founder enough to pay off the house, get your kids college figured out. But that became very aggressive. Valuations went up.

Back to my point on why it's probably one of the most common topics — I wish it was going to result in actual transactions, but in my world, the force factor is cash. So, if you go back to 2021, companies raised way too much cash. They're now sitting on that cash. All of these companies have been forced by their boards to cut as many expenses as they can, lower growth. So, even if you have to take down growth to 5, 10 percent, that's fine, but extend the runway. Most companies have done that. And you've probably heard terms like zombie-corns? I think there's a lot of zombie-corns out there; these businesses now that are sub scale, they've reduced growth to 5 percent, 10 percent, but they're just now making sure their breakeven and they don't have to raise another round because all of the internal structuring stuff has been done. The internal round where the board gets together and says, 'Well, we still think it's worth $1 billion dollars. Do we all agree? Yes. So, let's do an insider round at the same valuation as the last one.' A lot of them tried to go out and find new capital to come in. But as investors in the room will appreciate, people saw through that — like, I get that you want to keep the valuation at $1 billion dollars, but the company is not worth $1 billion dollars anymore. So, the restructuring has been done. Now you've just got this burning down of cash. But the problem is, is the burning down of cash is not happening as quickly as possible.

I went to a private equity dinner a few weeks ago here in New York, I think I was the most popular kid at the dance, because everybody was like, What's wrong with your client base? When are they going to realize they're sitting on a lot of companies that are not worth nor will they be worth what they once were? So, your clients are going to have to start thinking about selling these businesses. I had two dinners over the last two nights with the big-name firms. We brought up the topic. They're like, 'Look, we think M&A activity is going to accelerate, but we're not going to do anything today. We're going to live to fight another day. We're not going to take a company public today. We're not going to sell a company today. Because if interest rates do come down, valuations will get higher. But there's no force factor."

You can catch more from Hoyer, and the rest of the panel, in the podcast.