London, Jan. 30, 2024 (GLOBE NEWSWIRE) -- Global law firm Norton Rose Fulbright and predictive M&A intelligence company Mergermarket released their second annual Global M&A Trends and Risks Report today, which shows that the M&A landscape is poised to recover globally as more than half (59%) of global dealmakers surveyed expect their appetites for M&A to grow in 2024. Suggesting a pronounced shift in confidence, this figure includes nearly a quarter (23%) who expect their dealmaking appetites to increase significantly in the year ahead, compared to just 5% who said the same in 2023.
At the macro level, approximately half (47%) of dealmakers around the world are expecting M&A activity generally to increase compared to 2023, with the largest jump forecast in South and Southeast Asia. Just over two-thirds of respondents (68%) believe M&A activity in that area will grow in 2024 – the largest share across all regions – thanks to competitive valuations, regulatory environments that are less onerous and improved access to financing.
These and other findings in the 2024 report draw from a survey of 200 leaders and top-level executives, including chief executive officers, chief operating officers, managing partners, chief investment officers, heads and directors of M&A at multinational corporations, large private equity (PE) firms and major investment banks around the world. Drawing from both qualitative and quantitative insights, the report offers a comprehensive global perspective with breakdowns for every region and numerous sectors, yielding a thorough analysis of many key trends and risks impacting the M&A landscape in the year ahead.
Dealmakers see AI as both tool and acquisition target
As dealmaking optimism grows broadly, the technology sector is expected to see the highest growth in cross-border M&A activity in 2024, with 71% of respondents identifying it among their top sectors thanks to pent-up supply and demand. Artificial intelligence (AI) in particular has become a popular target for dealmakers around the world, with more than half (54%) of large PE firms surveyed (and one-third of respondents generally) looking to acquire an AI business.
AI has made even greater inroads in the dealmaking process itself, with a significant share already using or planning to use it in their internal documentation (74%) and for M&A due diligence (63%).
“Increased demand for both generative and predictive AI tools has created a corresponding interest in AI acquisitions among dealmakers, particularly in private equity and venture capital, as the technology sector continues to excite buyers around the world,” said Scarlet McNellie, Norton Rose Fulbright’s US Head of Corporate, M&A and Securities. “And these buyers are also becoming consumers of AI products as the sheer volume of data and demands of due diligence become difficult to manage without help from specialized tech, especially as M&A activity picks up.”
Leaders divided on M&A financing outlook, with Asia emerging as bright spot
Dealmakers are largely divided on the financing landscape in 2024, with 38% expecting access to financing to improve, 31% believing it will stay the same and 31% predicting conditions will worsen.
However, outlooks vary substantially among regions. Respondents see Europe as the most challenging environment for deal financing, while the US along with South and Southeast Asia appear to have significantly better financing options.
Broadly, dealmakers are casting a wider net for financing in 2024, as traditional funding conduits face increased pressure around liquidity and higher interest rates. Cash reserves are an overwhelmingly popular option, with 90% expecting it to be a commonly used form of financing, particularly in the US.
Similarly, 91% of survey respondents expect private credit to be the most commonly used form of financing in 2024, thanks in large part to its relative speed and ease of access. While traditional bank loans, equity capital and high-yield bonds are still important, nearly one-third (31%) of the executives surveyed say private debt will be the most important financing source for the year ahead, up from 14% in 2023.
“We’re seeing greater optimism among dealmakers for 2024 as financing becomes more available, with many of the opportunities put on hold last year striving to come back to market,” said Ayşe Yüksel Mahfoud, Norton Rose Fulbright’s Global Head of Corporate, M&A and Securities. “After a challenging period defined by the pandemic, shifting supply chains and historically high interest rates, dealmakers will be looking to use every tool at their disposal to achieve this long-awaited growth.”
Antitrust and ESG regulations will be key obstacles to deal opportunities
The regulatory environment presents a key obstacle to M&A activity in the year ahead. While ESG guidelines rank among the most important deal drivers, one-quarter of respondents (25%) include ESG-related regulation among the top two factors most likely to suppress deal activity in 2024. The vast majority of respondents (73%) also expect ESG scrutiny around the world to increase compared to last year, compounding the importance of ESG data.
Antitrust is also expected to have a pronounced suppressive effect, particularly in the US, EU and East Asia. One-third of dealmakers across regions say that antitrust will be among the top types of regulation and policy impacting M&A activity – more than any other category.
Outside of regulations, other impediments to deal activity include the increased cost of financing, commodity price risks, geopolitical uncertainty (particularly in the Middle East), transparency issues, ESG concerns broadly and issues overcoming valuation gaps.
The report also examines changes in deal size, acquirer appetites, M&A motivations and the impact of geopolitical tensions and supply chain challenges on M&A activity. The full report is available at www.nortonrosefulbright.com/MAoutlook2024.
Norton Rose Fulbright
Norton Rose Fulbright provides a full scope of legal services to the world’s preeminent corporations and financial institutions. The global law firm has more than 3,000 lawyers advising clients across more than 50 locations worldwide, including Houston, New York, London, Toronto, Mexico City, Hong Kong, Sydney and Johannesburg, covering the United States, Europe, Canada, Latin America, Asia, Australia, Africa and the Middle East. With its global business principles of quality, unity and integrity, Norton Rose Fulbright is recognized for its client service in key industries, including financial institutions; energy, infrastructure and resources; technology; transport; life sciences and healthcare; and consumer markets. For more information, visit nortonrosefulbright.com.
