Global Outlook for M&A in 2024
2023 set a milestone for M&A globally, and its echoes resound as we enter 2024. According to reports by Bain & Co, overall global M&A value dropped by 20%, highlighting the challenges and opportunities we face in this dynamic sector.
2023 was not easy for M&A globally, with volume decreasing by approximately 20% from the previous year, to approximately USD3 trillion. This decrease was particularly felt in the venture capital and private equity sectors, with estimated drops of 35% and 40% respectively. Strategic deals also decreased by 14%.
One of the biggest challenges was the difficulty in reaching agreements on pricing. While public market valuations went up, strategic deal multiples were the lowest in 15 years, at 9.8 times on average.
Trends and Strategies in Venture Capital
In this environment, venture capital firms have adapted their strategies, opting to acquire minority stakes. This has allowed them to avoid refinancing debt at the highest interest rates. In fact, there was a 4% increase in minority stake acquisitions worldwide, compared with the previous year.
Although there was more available finance than in 2022, it was costly. The bridge loan market has shrank, reflecting the weakness of M&A and economic uncertainty. However, bridge loans remain a key tool for supporting acquisitions.
Improvement in Profit Outlooks
Business outlooks are improving, which bodes well for M&A. S&P 500´s earnings per share increased by 2.5% in the last quarter of 2023- a positive trend in comparison with the 5.6% drop seen in the previous quarter.
In terms of the current situation and looking ahead, we expect a considerable increase in M&A. Possible international tax cuts and greater economic certainty could boost activity. In addition, the EV/EBITDA ratio shows that smaller listed companies, which tend to be a target for takeovers, are currently attractively priced.
M&A Trends for 2024
The current technological revolution and innovation are reshaping the M&A landscape. Accelerated take-up of emerging technologies including AI, blockchain and automatization is transforming business operations, opening new avenues for strategic collaboration and acquisition.
In 2023, we observed a growing interest in tech start-ups and innovative companies, not just by tech giants, but also by companies in traditional sectors which seek to digitise their operations and services. This interest results in an increase in investment in high-tech companies, which offer disruptive solutions and significant potential for growth.
As 2024 progresses, we expect this trend to grow, with a particular focus on cybersecurity, health technology and clean energy solutions. These sectors do not only promise high returns, but are also aligned with global concerns about data security, public health and sustainability.
At Confianz, we are ready to face these challenges and make the most of existing opportunities. Our experience in the M&A sector puts us in a leading position to advise clients in a constantly evolving landscape. We are committed to offering personalised solutions and strategies which are aligned with each company´s specific needs.