The M&A landscape presents a mix of promising opportunities and ongoing challenges. Low levels of M&A activity in 2023 have created pent-up buyer demand and a buildup in seller assets, making it a critical time for professionals in the industry to recalibrate strategies and sharpen their focus in preparation for the years ahead.
Cash-rich companies are now hungry for deals, so it’s vital for M&A professionals to stay abreast of these developing conditions and to identify the industries that are looking the most fruitful. Here we take a look at some of the global M&A trends that are shaping the market and where the biggest opportunities lie.
A record accumulation of capital
The incredible success of M&A in 2021, both in deal value and volume, set the precedent for high valuations across the board. But recent macroeconomic factors and geopolitical uncertainty left buyers wary of high-risk and expensive deals, leading to a lack of deals and companies stacking their capital.
Private equity firms now have a record amount of dry powder at their disposal which currently stands around $2.59 trillion. This sets the stage for an upswing for M&A with investors chomping at the bit and ready to wet their appetite within deals. But which sectors are looking the most appealing?
Industries to watch in 2024
Healthcare, technology, and energy are all attracting attention from dealmakers around the world. As digital transformation deepens across industries, companies will continue to seek strategic acquisitions to enhance their technological capabilities and market reach. With increasing reliance on cloud computing and data storage, investments in data centers and related infrastructure are expected to grow, fueling more M&As in this area.
Emerging technologies like AI and IoT are becoming integral to business operations, prompting companies to acquire capabilities in these areas. Thus large tech companies will be on the hunt to acquire promising AI startups. This move to digital transformation means that tech is moving into all sectors and this will be a key driver of deals in the coming years as businesses look to implement new technology and acquire the best talent.
The general consensus is that healthcare is set to have strong growth in 2024 with pharma leading the way. PwC’s Annual Global CEO Survey found that 54% of CEOs in the health industry are looking to make at least one acquisition in the coming year which suggests a promising outlook for the industry. On the buy side, PwC predicts large pharmaceutical companies will be looking to acquire mid-size biotech companies as drug patents expire and they look to exploit the emerging interest in GLP-1 medications for weight loss and diabetes. On the sell side will be hospitals as they struggle with staff shortages and rising cost and cutbacks.
ESG is having a major impact on the energy industry and is the catalyst for major investment in the sector. Both investors and consumers are now pushing for greener solutions which is heating up M&A activity as energy companies look into sustainable and renewable energy development to propel their growth.
The retail sector is also looking ripe for deals. Amidst the ongoing challenging financial market, businesses are running out of money. This is good news for those on the buy side, and we expect to see high levels of M&A activity with deals steadily increasing particularly in the UK market.
Cross border and UK deals heading for a rebound
The number of domestic and cross border deals decreased in the last quarter of 2023. But with the volatile financial market stabilising and interest rates poised to be cut before the US, it means that businesses will be on the lookout for new opportunities and it’s looking optimistic for domestic deals. The upcoming general election could also see an influx of sell offs as companies are looking to protect themselves from the impending tax implications that it could bring.
Interested in hearing more? Then read our blog on the current economic and political factors affecting the financial markets.
An increase in deal size and volume but smaller deals to come out on top
The high cost of capital and the less than favorable market conditions of late means that deals of all sizes have taken a tumble. The recent economic climate has scared off investors from larger deals but as we head into Q2 a cautious optimism is emerging. With the overall financial market looking to be improving, larger deals are anticipated with 82% of M&A leaders expecting the size of deals to increase in the coming year.
But many investors do not count their chickens before they hatch. Regulatory challenges have been affecting the completion of large deals and with fewer legal regulations and less risk, we see small and mid-sized deals as the biggest goers at this time.
Research shows that smaller deals can give businesses a competitive advantage and many may be cashing it on this sentiment by spreading risk and hedging their bets on smaller, more numerous deals of less than 40 million.
Overall the industry looks set to emerge in much better shape than the previous two years which has been a challenging and uncertain time for dealmakers. As expert experienced corporate finance recruiters we are incredibly excited to see the global market trends opening up new opportunities for our candidates. For those looking to progress their M&A career, staying ahead of these global M&A trends will ensure that you are able to make the most of the many opportunities that lie ahead.
Find your ideal M&A role
At Gambit Search we understand the industry from the inside out and can act as your guide to securing the best role within M&A. We have close relationships with leading decision-makers in the industry and are here to guide you on your path to success. Whether you are looking to secure a more senior position or make a strategic lateral move, we are here to help you find your ideal role. Get in touch now or by calling 0203 633 2500.
