Cebron Group

M&A Outlook Points to
Rebound in Deal Market in 2024

What’s different about the past year and a half is how discerning dealmaking has been. Volumes spiked to all-time highs in 2021 and early 2022, propelled forward by what looked like the ‘Goldilocks combination’ of moderate inflation, a strong economy, record profitability for companies, and – most importantly – ultra-low interest rates.

But, in March 2022, the Federal Reserve began its most pronounced big-phrase tightening cycle in history to curb elevated inflation, which then saw the cost of capital race upwards, leading to an easing of activity on the back of an economic global slowdown, greater macroeconomic uncertainty and more geopolitical tensions.

US PE deal volumes are forecast to be 27 per cent lower in 2023 than the peak seen in 2021, and a further 19 per cent lower still compared with 2022. US corporate M&A (deals with an enterprise value over $100 million) is forecast to be 38 per cent lower in 2023 than the peak in 2021, and 9 per cent lower compared with 2022.

What will M A look like in 2024? According to the results of the EY-Parthenon CEO outlook survey, enthusiasm for deal-making appears to be returning to pre-pandemic levels. Specifically, in the next 12 months, 52 per cent of US CEOs intend to do M A, almost all of whom (92 per cent) say that an acquisition would increase an organisation’s value. Only the final TMT (technology, media, telecoms) CEO who answered a question about M A activity disagreed. By contrast, when asked if they planned to divest assets in the next 12 months, 58 per cent of all CEOs agreed they did. As capital spending efforts ramp up, so will efforts to unload the excess.

Chief executives rank forming (joint ventures, strategic alliances and so on) with third parties as the highest priority tactic they can take (63 per cent), as they look to lower-risk options for capturing the potential of new technologies. All CEOs asked about generative AI (GenAI) are making, or plan to make, significant bets on it (though they mostly agree the technology’s actual evolution remains uncertain).

US PE deal volume

EY’s baseline outlook suggests deal volume has found a floor and will finish 2023 ~19% below last year before seeing a ~13% recovery in 2024.

Source: EY 2024. The first figure illustrates historical US PE deal volume, including quarterly data and annual totals. Historical data is sourced from Pitchbook and is utilized through Q2 2023. The EY Macroeconomics team’s outlook includes values for the remainder of 2023 as well as 2024. The baseline forecast for 2023 is deal volumes down 19% relative to 2022. The optimistic and pessimistic scenarios are -16% and -23%, respectively. The 2024 outlook sees 13% recovery in the baseline. The optimistic and pessimistic scenarios are 28% and 2% recovery relative to 2023, respectively.

Key Strategic M&A Trends for 2024:

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