Strategy

M&A activity was down last year, but is looking up for 2024

McKinsey cites strong Q4, positive economic signs as signs for optimism.
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Merger and acquisition (M&A) activity was down in 2023, but McKinsey says we should keep our chins up based on the strong final months of the year and economic optimism among professionals.

Here’s the shot: Global M&A activity last year totaled $3.1 trillion, dropping 16% from 2022, McKinsey found in a new report by senior partners Jake Henry and Mieke Van Oostende. And the chaser: The value of M&A activity in the fourth quarter increased 41% over Q3 and 37% year over year.

The report’s authors noted other signs of optimism, including positive macroeconomic factors such as tempered inflation, healthy job growth, and solid consumer spending.

“This improving picture has buoyed economists’ hopes of a soft landing for the US economy—a sentiment shared by many investors who boosted stock market returns at the end of the year,” the authors wrote. In addition, of the nearly 1,000 respondents to McKinsey's survey, 46% expected their home economies would improve over the next six months, while just 26% expected them to worsen.

The McKinsey experts also said private equity and principal investors, who “fled to the sidelines” last year, may get back in the game in 2024. “Some funds will need to consider exit strategies and redeployments in the near term, and others, along with corporate dealmakers, may be aroused by the more than $2 trillion in undeployed capital as of the end of 2023.”

The case for M&A. Factors like artificial intelligence technology and a growing focus on sustainability are transforming the way we do business, meaning “CEOs across industries tell us that M&A is a more vital strategic lever than ever,” Henry and Van Oostende wrote. An acquisition allows companies to adapt to these trends faster than organic growth, they added.

McKinsey’s analysis of the 2,000 largest public companies on Earth found that “programmatic acquirers,” meaning those making more than two deals annually over 10 years, “outperformed all other M&A strategies, including organic growth, which actually destroyed value in the same period.”

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.