M&A 101: What Lies Ahead in 2024
Hey there, fellow M&A enthusiasts! 👋🏻 Before we dive deep into other exciting M&A topics, let’s kick things off with a sneak peek into the M&A landscape of 2024.
📈 U.S. M&A Activity on the Rise
After a slow start to the year, U.S. M&A activity is showing signs of an uptick, driven in part by the need for companies to acquire technology and other capabilities to spur growth, the evolution of the energy sector, and private equity deal activity. Through November 30, $1.38T of deals valued at $100M-plus have been announced, according to an EY analysis of Dealogic data, roughly in line with the same period in 2022.
⬅ Tech M&A Making a Comeback
Tech M&A volume and value saw a jump in Q3 from prior quarters this year but has generally been down in 2023 and still trails pre-pandemic levels from lows earlier in the year. Q4 positive trend has set the stage for a stronger 2024. While companies are being more discerning, a surge is expected as companies look to add AI and other capabilities to their product portfolios. In fact, demand for these technologies has also helped drive tech stocks: the sector has outperformed the S&P 500 by about 10% since the start of 2022, according to EY analysis of CapIQ data. Meanwhile, PE funds are getting back into the market via sell-side activity and are also expected to accelerate their investment in software companies as multiples decrease.
🏃🏻♀️ PE Firms on the Move
PE firms are starting to increase their investment, closing the valuation gap. Tech deal multiples sunk to 7.8x EV/EBITDA in the first quarter of 2023. While that has since risen to 17.5x by the end of the year, it’s still below the highs seen in 2021 and 2022. This trend is likely to sustain take-private transactions as PE can analyze cost drivers and refocus products and roadmaps.
🛡 Cybersecurity Continues to Shine ️
Cybersecurity remains a top priority, especially with the complexities of safeguarding data in hybrid work environments and the explosive adoption of GenAI. Companies continue to acquire new and emerging businesses to maintain their share of the market.
🔋 Energy Deals on the Horizon
In the energy sector, decarbonization and consolidation are driving deals in 2024. The combined oil and gas, power and utilities, and mining and metals sectors have seen a surge in announced deal value this year, driven by strong cash flows, renewed investor confidence, and legislative incentives around alternative and renewable technologies. More than $332B in transactions valued at $100M and above were announced by US energy companies in late 2023. These deals include both traditional energy initiatives and those focused on the energy transition.
🤭 Conclusion: An Exciting Year Ahead
2024 promises to be an exciting year for M&A, filled with big deals, innovation, and the occasional regulatory challenge. As we navigate this dynamic landscape, keep your eyes on tech as it makes a comeback, private equity firms making strategic moves, and the ever-important world of cybersecurity. And let’s not forget the energy sector, where decarbonization and consolidation are reshaping the game.
Stay tuned for all the action, as we ride the waves of M&A in the year ahead — As the weekend nears, recharge and prepare for the exciting week ahead. Have a great weekend, and let’s hustle on Monday! 💪🏼
