Strategy

M&A is poised for a resurgence this year

A slow 2023 left PE firms with lots of dry tinder.
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After a sluggish 2023, the current economy has dealmakers ready to step back into the ring.

Eleven “megadeals” of $10 billion or more (not counting debt) have been announced thus far in 2024, the Wall Street Journal reported. They include Capital One’s $35.3 billion purchase of Discover and Home Depot’s $18.25 billion acquisition of roofing distributor SRS Distribution. (Synopsys also acquired Ansys for $35 billion, in a deal that apparently did not include buying any vowels.)

Other not-so-mega deals may also be on the horizon, if Grant Thornton’s M&A Pulse Survey is any indication: 81% of the M&A professionals surveyed—including PE investors, I-bankers, and the like—said they expect to see deals increase in the next sixth months.

There were only 16,391 deals made in 2023, according to Pitchbook, as high interest rates and high inflation put a damper on the market. (In contrast, 2021 saw a record-high of 20,413 deals.) That left private equity firms flush with cash to spend or return to investors, which could trigger more deals, Grant Thornton reported. Interest rates are also expected to drop soon: 68% of M&A professionals foresee rate cuts in the next six months.

Enthusiasm tempered by prudence: Still, dealmakers are ramping up their due diligence, Bill Pollatos, a transaction advisory partner at Grant Thornton, said in a report. “In the recent exits I’ve advised clients on, the amount of diligence that we’ve gone through has been immense, and we were on the sell side,” he noted. In particular, buyers are looking for more information on prospective acquisitions’ human capital, supply chains, and technology.

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.