2024 M&A Outlook

Explore the latest insights and trends shaping the 2024 M&A landscape in our newest article. Discover key strategies and predictions that could redefine business acquisitions this year. Stay informed and ahead of the curve with Benchmark International's comprehensive outlook.

2024: A Return to Confidence

Mergers and acquisitions (M&A) happen when dealmakers possess not only cash but confidence. In 2024, that's the transformative combination we expect to see.

After pandemic-instigated disruptions to M&A activity in 2022 and 2023, the gold-standard EY-Parthenon Deal Barometer for 2024 also shows US M&A activity picking up - rising an average of 12% in 2024. [1]

This growth is dependent on the actions of the U.S. Federal Reserve, which initiated a rapid cycle of eleven key interest rate hikes in 2022 and 2023.

Rates are currently holding steady, and the Fed has signaled they will initiate a series of rate cuts in 2024 that will continue into 2025. Most central bankers predict between three and six rate cuts, possibly beginning as early as Q2 2024.

We concur with the barometer that as interest rates subside, M&A activity will return to pre-pandemic levels of activity, with the number of deals in 2024 just two percent below the average number of deals in 2017–2019.

There’s more positive news as well. Not only are we and most M&A professionals optimistic about 2024, but polling of potential buyers shows a return to confidence in the interest rate environment this year, too. Additionally, there are indicators that M&A interest from foreign deal partners will rebound in 2024 following four years of decline. [2]

This welcome return to confidence, along with an abundance of dry powder stockpiled over the past several years, should make dealmaking a go in 2024.

2023: A Look Back

Globally, M&A activity slowed in 2023 on the heels of record-breaking highs in 2021 and 2022. These highs were fueled by ultra-low interest rates, advantageous tax environments, pandemic stimulus infusions, and a more amendable regulatory climate.

The M&A market finished 2023 with $2.9 trillion in total global deal volume, failing to break the $3 trillion mark for the first time in 10 years. Additionally, Q4 2023 closed with the second-lowest Q4 global M&A deal volume in the last decade. [3]

Completed M&A deals globally in 2023 numbered approximately 30,500. In comparison, 2022 saw 41,345 deals, and 2021 closed at 43,057. [4]

High interest rates were the critical driver of the 2023 slowdown as higher borrowing costs prompted a more cautious acquisition strategy, impacting both the volume and value of deals made nationwide and in many sectors.

Other key factors in last year’s sluggish M&A market were reduced leverage driven by the increased cost of debt financing and increased regulatory oversight, making transactions more challenging and time-consuming to finalize.

On a positive note, at the close of 2023, global private equity (PE) dry powder was at an unprecedented high of $2.59 trillion. [5] As 2024 advances with this swell of available cash, a rebalancing market, and a hungry pool of buyers and sellers, we are confident the time is ripe for a return to stable M&A activity.

2024: A Closer Look

Technology

Driven by growing interest and adoption of artificial intelligence (AI) solutions in every industry, we expect technology to be a top-performing M&A sector once again this year. Predictions show global tech sector deals pushing past the $600B mark we saw last year. [6]

As AI continues to grow, we also expect to see increased demand for cybersecurity solutions to combat nefarious use by bad actors and states.

This relatively new scenario, which began brewing in the fall of 2022 when generative AI platforms began entering the public domain, should bubble over into strong M&A activity in 2024. This is because oftentimes it is more cost-effective for companies entering or growing in the AI space to acquire technical talent and tools than to build from within.

In addition to AI and cybersecurity, other subsectors of technology that we expect to perform well this year are fintech, health and healthcare technology, and green technology.

Challenges to the technology sector in 2024 include continued geopolitical headwinds in Israel and Ukraine, export controls on China, ongoing regulatory scrutiny (especially when it comes to mega M&A deals), and increasing privacy laws and regulations.

Healthcare

Influenced by an aging population with more chronic health needs, we expect continued robust M&A activity in the healthcare sector in 2024. U.S. hospital and health system M&A will be particularly strong. This activity increased 27% year over year in 2023, and several deals announced in 2023 have been finalized in Q1 2024 already. [7]

Deals will be led by healthcare companies looking to combine systems, rather than private equity (PE), though there will still be PE deals as well. Examples from Becker’s Hospital Review thus far in 2024 include Wisconsin-based Froedtert and ThedaCare launching merged systems and Alabama’s Hospital Health System acquiring DeKalb Regional Medical Center in a deal expected to close Q1 2023.

Other sub-sectors of healthcare where we believe M&A activity will perform particularly strong in 2024 are biopharmaceuticals (especially oncology and immunology), digital health (especially AI-powered tools and platforms), healthcare technology (especially remote patient monitoring), and behavioral health (especially tele-health-based therapy).

Challenges in the healthcare sector in 2024 include ever-evolving regulatory landscapes and margin pressures like continued struggle to ensure a sufficient supply of high-quality labor and rising labor costs to attract and retain providers and staff.

Energy

By measure of deal volume, energy was a top five industry sector M&A performer in 2023. [8] With a growing global emphasis on clean energy and sustainable practices, 2024 is expected to be even stronger.

Increasingly, consumers are looking for businesses that embrace cleaner, more environmentally responsible energy sources, and the government is rewarding those that do with renewable energy tax credit incentives.

Companies focused on solar, wind, and other renewable energy sources and those that have technologies that support clean energy practices will be highly sought by those looking to expand or diversify.

Challenges for the energy sector in 2024 include continued struggles with equipment and raw-materials backlog, including solar panels, wind turbines, and polysilicon. Transportation issues for materials may also be influenced by geopolitical conflicts and instability around the world, such as shipping disruptions in the Red Sea.

Closing Thoughts

Although the outlook for 2024’s M&A landscape varies for each company based on specific circumstances, the overall picture of a healthier M&A market is already shaping up. If the U.S. Federal Reserve continues to keep interest rates stable and follows through on projected rate cuts, we’re confident that global M&A deals in 2024 will outperform 2023. One recent survey shows that 60% of global CEOs plan to make at least one acquisition in the next three years. [9] This is an excellent time to join them. Let’s start the conversation.

Sources

[1 and 1b] EY, M&A outlook points to gradual rebound in deal market in 2024 https://www.ey.com/en_us/mergers-acquisitions/m-and-a-outlook#:~:text=The%20EY%2DParthenon%20Deal%20Barometer%20anticipates%20a%20gradual%20recovery%20in,18%25%20below%20the%202021%20peak.

[2] Citizens Bank, Citizens 2024 M&A Outlook: The unexpected factors fueling buyer confidence https://www.citizensbank.com/corporate-finance/insights/mergers-acquisitions-outlook-2024.aspx

[3] Bloomberg, ANALYSIS: Despite Q4 Boost, 2023 M&A Deal Volumes Disappoint https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-despite-q4-boost-2023-m-a-deal-volumes-disappoint

[4] LINQTO, M&A Outlook in 2024: Why Deals Could Surge Next Year https://www.linqto.com/blog/mergers-acquisitions-outlook/  

[5] S&P Global, Daily Update: December 21, 2023 https://www.spglobal.com/en/research-insights/articles/daily-update-december-21-2023#:~:text=The%20proverbial%20mountain%20of%20dry,Management%20holding%20over%20%2455%20billion.

[6] Zinnov, 6 Key M&A Trends Reshaping Technology Services Landscape in 2024 https://zinnov.com/mergers-and-acquisitions/6-key-technology-services-mergers-and-acquisitions-trends-2024-blog/

[7] Becker’s Hospital Review, A flurry of health system M&A deals to start 2024 https://www.beckershospitalreview.com/hospital-transactions-and-valuation/a-flurry-of-health-system-m-a-deals-to-start-2024.html

[8] Bloomberg Law, ANALYSIS: These Target Industries Show Promise for M&A in 2024 https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-these-target-industries-show-promise-for-m-a-in-2024

[9] PwC, 27th Annual Global CEO Survey https://www.pwc.com/us/en/library/ceo-survey.html