M&A Outlook 2024

89% of participants expect deal volumes to increase or remain broadly stable, evidencing confidence in deal activity and the M&A market for 2024. Respondent forecasts for 2023 were less optimistic.

In a positive outlook for deal activity, 78% of respondents intend to pursue M&A in 2024. A sense that the major economies are at the top of the interest rate cycle coupled with valuation rebasing in some sectors may provide opportunities to unlock attractive deals.

In a positive outlook for deal activity, 78% of respondents intend to pursue M&A in 2024. A sense that the major economies are at the top of the interest rate cycle coupled with valuation rebasing in some sectors may provide opportunities to unlock attractive deals.

Technology, Healthcare & Pharmaceuticals, and Energy & Infrastructure are expected to be the most active sectors in 2024. 2023 witnessed strong activity across all of these sectors. 

For the second year in a row, 67% of respondents anticipate that 2024 will be a buyers’ market. Elevated market volatility is driving lower buyer confidence. The resultant lack of buyers is decreasing the range of options available to sellers.

Expansion of customer base & lines of business and the realisation of synergies were highlighted as the key drivers for M&A activity in 2024 as investors look to unlock value. De-risking and success planning also continue to be strong drivers of activity.

As with prior years, valuation gaps continue to be cited as the primary reason for deal failure. 21% of respondents believe macro considerations are the second most likely driver of deal failure, perhaps reflecting volatility and market confidence.

Unsurprisingly financial due diligence was selected as the most common type of deal work that will be performed. Respondents highlighted that ESG and IT & Operational diligence continue to increase in importance.

87% of M&A leaders cited the availability of financing as ‘adequate but with some constraints’. This somewhat muted response may reflect the impact of higher interest rates on the debt capacity of acquisition targets.

Property and construction was highlighted as the sector most sensitive to interest rate movements which is expected with leveraged commercial property portfolios and heightened build costs. Other industries noted as having a pronounced impact are listed below.

66% of M&A leaders identified availability/cost of financing as the primary obstacle facing deal activity. While a subsequent response in relation to access to financing provides caveated confirmation that funding is available, responders’ views on the inhibitors highlight that formulating an executable funding strategy will be key to M&A success in 2024.

The significant majority of dealmakers expect to fund less than 50% of a deal using debt. This relatively conservative position may reflect the strength of corporate balance sheets and the perceived constraints on the availability of debt due to elevated interest rates. 

29% of M&A leaders highlighted awareness of targets as the greatest enabler of dealmaking in 2024 followed by speedy access to financing. As in prior years, strong networks will need to be maintained to ensure market knowledge.

63% of respondents expect strategic buyers to be most active in 2024 as companies seek to strengthen their operations to achieve growth ambitions. The strong prediction for private equity (37%) reflects the increasing growth of the sector and the abundant dry powder.