2024: The Year for M&A Resurgence
By Mark Williams, CRO at Datasite
With headlines detailing tighter financing costs and geopolitical challenges, the world of mergers and acquisitions (M&A) is poised for a resurgence in 2024. New deals on platforms like Datasite, which annually facilitates around 14,000 new transactions at their inception, have increased by 6% year-over-year in this year’s second half. As dealmakers rush to conclude transactions before year-end, this momentum may intensify even more.
Diverse Sectoral Trends
Dealmakers have been active in the second half. In September, there was a notable spike in new industrial deals on Datasite. Technology, media, and telecommunications (TMT) sectors also sustained high deal volumes through the summer, offering a positive indication for early 2024. Likewise, consumer and healthcare industries increased deal kick-offs over the summer, while energy M&A deal kickoffs continue to rise, with global sell-side deals surging more than 17% in the second half to date, when compared to the same period last year. In fact, there was heightened activity in the fall, with many of these deals anticipated to close in the second quarter of 2024.
Driving Forces
Several factors are prompting this increased M&A activity, with stabilizing interest rates, efforts to fortify supply chain resilience, and industry consolidations being among the key drivers. For example, large oil and gas companies are under pressure to make investments to consolidate and scale. A November poll showed that consolidation and divestitures are expected to be the biggest catalyst for energy M&A activity in 2024. Additionally, the resettling of valuations could lead to smaller and more midsize M&A deals, especially in the near term, as asset sale kickoffs on Datasite this fall were much higher than mergers. Larger deals may have to wait for better financing conditions.
Increased demand for digitization and technological innovation is also spurring M&A activity. The transition to renewable energy, for example, is attracting US investment in climate tech and cleantech, with more than $31 billion invested in the sectors between 2019-2021.
Additionally, artificial intelligence (AI) promises a new age of transformation like never before, with new business models, improved efficiency and productivity across several sectors. In fact, more executives than ever discussed AI in earnings calls this year, following projections that the AI market size will reach $407 billion by 2027.
In 2024, AI will continue to take center stage, not only influencing M&A deals but also transforming the way they are managed. AI has already made significant strides in streamlining business operations, identifying potential M&A targets, and automating various tasks associated with deal processes. Global dealmakers identified increased productivity, especially through generative AI (GenAI), as its primary benefit. GenAI has the potential to expedite M&A processes by up to 50%. Moreover, cognitive AI applications are assisting dealmakers in efficiently identifying and targeting potential deals by analyzing anonymized private equity and other transaction activities.
Despite these advancements, the integration of AI – especially GenAI – into M&A practices is not without challenges. Concerns around privacy, intellectual property rights, security, and data quality persist, with most dealmakers favoring government regulation of AI.
Future Prospects and Challenges
As we look ahead to 2024, the outlook for M&A appears promising – despite economic uncertainties and geopolitical challenges. The current surge in activity across sectors, coupled with the transformative impact of artificial intelligence, suggests a dynamic and evolving landscape. While challenges persist, the resilience of dealmakers and the integration of innovative technologies like GenAI are poised to redefine the future of mergers and acquisitions.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.