Deal activity has slowed this year and those on the frontlines who spoke at the St. Louis Smart Business Dealmakers Conference are not only realizing it, but they're adjusting.

"It's not 2022 anymore where everybody was kind of going crazy and opportunities and multiples were extremely high," says Brightstar Capital Partners Principal Jacob Herschend. "Now we're seeing a lot more patience on the sell side where folks have said, 'You know what, we thought we were ready to sell, we're not ready to do it right now. We're going to hold off. We're going to wait a little bit longer.' But if they are wanting to sell, they are actually sharpening the pencil before they're getting ready to actually make that move."

Being patient and more dialed in, Herschend says, has led to a lot more conversations happening between sellers and their advisers, which has helped get things moving in the right direction. For Brightstar, the shift has given the firm an opportunity to really get to know folks and build a relationship of mutual respect, which is more likely to lead to win-win opportunities on both sides.

Wallis Companies CEO Anson Scoville says he's experienced the overall pace slowing down.

"On a typical year — I've been with the company for nine years — maybe we look at a deal a month that crosses my desk. There's a lot of investment banks that specialize in our industry and reach out to us with a data room or a CIM just to say are you interested? In the last five months I think I've seen two of those. So it seems like things have slowed down little bit."

He says for the family-owned petroleum distributor and convenience store operator in the Midwest there are always single-store operators who want to sell and are looking for 12-14 times multiple based on what they hear about valuations. That's created some dissonance in the industry where there's an expectation based on the M&A climate over the prior two years that high multiples are being paid. While that's true, he says those high multiples were paid for a number of reasons — synergies, geographic expansion, etc. So, while that idea still permeates some of the sellers and can create transaction challenges, it's not like that across the board.

"Our business has had a lot of consolidation over the years. There's a lot of aggregators out there, private equity back, there's some favorable tax treatments that make our businesses very attractive. I don't know if the low-hanging fruit is gone, so maybe now it's companies like us that are committed for the long haul, and it would really take just some kind of seismic shift for us to consider selling just because we love our business and it's doing well."

CIBC Cleary Gull Director Brian Howley says fourth-quarter data has shown that some of what many in the M&A profession had all been sensing in the market materialized in the numbers. Valuations, he says, have come down from the peak from 2021 and the first half of 2022. Some of that is related to the tightening of the credit markets along with the rising interest rates. But something to keep in mind with 2021, he says, is that there was a bit of an overhang that buyers and sellers were working through.

"All of the deal service providers were at maxed-out capacity just trying to get stuff done. You look at the fourth quarter of 2021 and compare that to the fourth quarter 2022, and there was about a 20 percent drop in volume. But if you normalize that overhang from some of the deals that got put on hold from early on in the pandemic that got pushed through, we're really only down about high single digits, if you think about a normalized comp year. So, there is still quite a bit of deals getting done."

There's reason to believe that deal volume will remain healthy, in part because of demographic shifts.

"There's about 2.3 million businesses out there that are owned by Baby Boomers. Data shows that about 60 percent of those business owners do not have a succession plan. They don't have the next generation to pass it along to. These businesses are employing roughly 25 million people across the U.S. And just to give you some perspective, the state of Texas has approximately 29 million people in it. There are 10,000 Baby Boomers that are retiring on a daily basis, so there are going to be deals to be had. We just need to be looking in the right places."