M&A in 2024: Ready to ride the upturn?

It’s been a tough year for the global M&A market. All the ingredients for uncertainty and volatility have been in the mix. From geopolitical tensions and conflicts to inflation, recession risk and rising interest rates, conditions continue to test even the most optimistic dealmakers.

After the record post-COVID bounce, starting in mid-2022 the market slid into five sustained quarters of low transaction volume and value. The first 10 months of 2023 saw M&A deal value down 22% from the same period in 2022.¹ That was the lowest January to October total that we’ve seen since 2013.²

Green shoots starting to show

But looking ahead, some encouraging green shoots are starting to show. We’ve seen that mega deals are still possible. Microsoft persevered with its Activision acquisition, and eventually won the day.³ Meanwhile, Exxon recently announced its $59.5 billion deal with Pioneer.⁴ IPOs are coming back, with Arm Holdings stock market return a 2023 landmark.⁵ There’s been a steady stream of tuck-ins across industries. And private equity activity is picking up too.

That’s not to say that conditions will be smoother from now on. There’s every sign that 2024 will shape up to be just as choppy as 2023. But dealmakers are clearly learning how to operate in this challenging new environment. As they continue to evolve their approaches, they need to bear a few key trends in mind.

1. Increasingly complex regulatory landscape demands stamina
   There’s no question that the regulatory landscape has become much more complex. Regulators in most jurisdictions are scrutinizing deals more closely than ever. And where cross-border deals are concerned, economic nationalism and related concerns over technology governance and often competing regulatory agendas are raising more hurdles to getting a deal through. As a result, timetables of 12-18 months from announcement to close are the new normal in many cases, versus 8-9 months just a couple of years ago. So dealmakers’ tenacity and commitment to the long haul are now essential qualities.
   
   
2. Macroeconomic headwinds continue to blow 
   Uncertainty remains the only reliable macroeconomic indicator. Despite the continued resilience of the US economy in particular, the potential for a hard landing is by no means behind us and recession of greater or lesser severity remains a real possibility. While inflation may be finally heading in the right direction, the interest rate hikes that dialled it down will continue to impact the cost of financing for the foreseeable future. And concerns about debt go far beyond leveraged deals. Sovereign debt levels are creating greater concerns, and real-estate sectors around the world are feeling the squeeze. Add unpredictable geopolitics to this picture and it’s clear that living with uncertainty must now simply be baked into doing business.
   
   
3. Technology pays in M&A
   As the perception of technology integration has flipped from a cost of doing business to a source of growth and competitive advantage, technology is taking an ever-more central role in M&A strategies.
   

Be ready for the turn

The green shoots I mentioned earlier are definitely encouraging. And it’s important to remember that, even though activity is not where it was a couple of years ago, we’ve still seen around $2 trillion in deal values globally this year.⁷  

But don’t expect a dramatic V-shaped upsurge like we saw after COVID. The recovery, when it comes, will play out in different ways. We’ve already seen how well-capitalized businesses have been able to take advantage of attractive valuations to acquire growth businesses with the right assets and technology. That will continue. 

There’s plenty of pent-up energy in private equity too. And as players learn to operate in the post cheap-money era, we’ll see activity coming back as buyers evolve their value strategies and sellers re-evaluate their price expectations. In other words, the logjam will break. 

If the market has shown anything over the last few years, it’s the amazing ability to adapt fast and learn on the go. One example? The rapid switch to virtual due diligence necessitated by the pandemic. Dealmakers will adapt to today’s testing environment too. Focusing on where growth and value can be found will be the keys to success in 2024. And technology will be at the heart of that.