Cautious optimism: The shifting state of M&A activity in 2024

When it rains mergers and acquisitions news, it pours.

In a buzzer beater just before the holidays, we got two updates that offer a clarifying glimpse into the 2024 M&A landscape.

First up: The Federal Trade Commission and Department of Justice finalized updates to their joint merger guidelines, marking the end of an almost two-year process to refine descriptions of the two agencies’ enforcement practices for mergers and acquisitions.

“Fair, open, competitive markets have been essential to America’s dynamic, thriving economy, and policing unlawful mergers is our front line of defense against harmful corporate consolidation,” FTC Chair Lina Khan said in a statement.

The updated guidelines, which include stipulations about market concentration and cutting off entrants to crowded markets, have an added consequence as the 2024 M&A pipeline gets set to kick off.

“The finalized FTC and DOJ merger guidelines usher in the broadest change to how regulators review M&A in the US in 40 years,” Mitch Berlin, EY’s Americas vice chair for strategy and transactions, said in an emailed statement. “CEOs and boards will face a steeper climb to gain regulatory approvals and should immediately start preparing for the lower thresholds that will trigger a presumption of anticompetitive effects and increased levels of information flow.”

That’s a not-insignificant deterrent for a new year that otherwise seemed set for a M&A refresh. After a 2023 slowdown, some analysts have predicted the 2024 M&A market could usher in an upswing in deals, and a recent report from PwC offers additional insight into the specifics of M&A activity next year.

The topline takeaway? Cautious optimism.

The report’s authors note that “a soft landing for dealmakers” appears increasingly possible amid decreases in inflation, while a solid job market has simultaneously cushioned the economy. That said, “higher-for-longer interest rates, geopolitical shifts, and increased regulatory activity” continue to be a threat to truly revived M&A activity.

PwC anticipates some notable sector-to-sector discrepancies. Anticipated health services M&A activity looks relatively solid, and the firm expects “healthy [M&A] activity levels” for pharmaceutical and life sciences industries. The outlier is the usually hyperactive tech, media and telecommunications (TMT) category.

“Overall, the [TMT] sector is being slow and cautious given the market,” the report’s authors note, adding that in light of regulatory scrutiny for big transactions (*cough, cough*, see above), certain deals “may be pushed back until after the November 2024 election.”

In the first half of 2024, PwC expects the tech and media M&A market “to remain subdued,” but if “low valuations and financial challenges for startups” continue, it could “drive an increase in deal volume, albeit at lower prices.”

Like so much about the new year, we’ll have to wait and see.