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You asked, we delivered. Well, you didn’t ask, and someone else actually delivered, but we had a feeling you were eager for more updates about the state of M&A activity in 2024.
That’s exactly what we get from Deloitte’s annual M&A trends survey, now in its 10th year. The verdict this time around: A rebound looks likely, and we have an unimpressive 2023 to thank for that.
“Last year was…a down year for M&A, both from volume and value perspectives,” Barry Winer, Deloitte’s head of research for mergers, acquisitions, and restructuring services, told CFO Brew. “It was one of the softest years really in quite some time, more than 10 years. Coming into the survey’s scoping efforts, last fall, we were keen to get a sense for where the winds were blowing.”
And now it looks like the winds are blowing in a positive direction, for volume and value. According to the survey, 83% of respondents said they expect their orgs’ deal volume to either jump “somewhat” or “significantly” in the next year. That marks a 14 percentage point increase over the last two years. Larger deals could be on the horizon, too: 82% of respondents said they expect the size of their orgs’ deals to grow next year as well.
In general, there’s a sense of optimism in the air, but that doesn’t mean uncertainty and risk have gone away—or even diminished. The key difference is that M&A leaders are more comfortable proceeding in spite of it, Adam Reilly, national managing partner for Deloitte’s mergers, acquisitions, and restructuring services, told CFO Brew.
“A lot of the challenges that we’ve seen in the deal market—things like interest rates and inflation, which are obviously linked to some degree, the geopolitical challenges, some regulatory challenges—all those things are still out there,” Reilly explained. “They haven’t necessarily gone away, but I think they’re better understood.” And when it comes to interest rates in particular, the general sense that they might come down in the future is also “providing some level of optimism that’s moving the market a bit,” he said.
As M&A leaders regain confidence, there’s also an increased focus on dealmaking basics, per the survey. According to the survey, 44% of corporate and 47% of private equity dealmakers said a solid and well-defined M&A strategy was the most important ingredient of successful M&A deals.
While strategy is “omnipresent, and always part of the mix,” Winer noted that “the degree to which our respondents focused on [strategy] was notable…That’s also consistent with another finding of the survey, which is that in 2023, because the M&A dealmaking market was tough, many of the respondents, a very large percentage, more than 90%, focused internally.”
He continued: “We saw a great deal of restructuring activity, transformation activity, which prepares some enterprises—whether they’re private equity or corporate—for better times ahead.” And there’s reason to expect better times ahead, according to Winer and Reilly.
The first few weeks of the year only “buttress the optimism” found in the report, Winer said. “We’ve had over $100 billion of deals announced in January so far. That’s significantly up year on year,” Reilly said. “We look at that as a little bit of actual market validation of what we’re seeing in those positive indications that people think that M&A is going to rebound this year.”
While there’s “some caution” to that excitement, Winer said even if “no one has a crystal ball…the volume and value of deals coming out so far in January is notable. It’s all optimism-inducing. ‘So far, so good’ would be the headline.”