Outlook for M&A and Shareholder Activism in 2024
The M&A Environment in 2024 Global deal value in 2023 fell to the lowest level seen in a decade. It was the first year since 2013 that the M&A market failed to hit the $3 trillion value mark, with continued reduced deal activity from private equity firms, which spent 36% less on acquisitions than in […]
James E. Langston and Kyle A. Harris are Partners at Cleary Gottlieb Steen & Hamilton LLP. This post is based on their Cleary Gottlieb memorandum.
The M&A Environment in 2024
Global deal value in 2023 fell to the lowest level seen in a decade. It was the first year since 2013 that the M&A market failed to hit the $3 trillion value mark, with continued reduced deal activity from private equity firms, which spent 36% less on acquisitions than in 2022. For boards and management teams pondering the M&A environment in 2024, a complex mix of macroeconomic, geopolitical and sector-specific headwinds and tailwinds make prognostication difficult.
Such a complex transactional environment provides challenges but also opportunities. From our vantage point, the number of transactions being actively considered is much higher than the relatively depressed 2023 metrics imply, suggesting many deal-makers are not deterred. Below are some key themes from 2023 and lessons for 2024.
Among other sources of friction, the biggest barrier to M&A has been the slowly narrowing but still lingering valuation gap between buyers and sellers in many sectors, which has been exacerbated by the increased cost of capital. In the U.S., the latter appears to be on a path to stabilizing, as a consensus emerges that interest rates have likely peaked, with Federal Reserve policymakers signaling potential rate cuts by the end of 2024. While this bodes well for acquisition financing and deal making generally, the cost of capital will remain elevated relative to pre-pandemic levels for some time and further valuation resetting is likely necessary to bridge the gap between many buyers and sellers, particularly in leveraged transactions.
