Spotlight on Q1 2024 M&A: The Beginning of a Rebound?

Following a sluggish 2023, M&A activity rebounded in Q1 2024, in part due to the resurgence of mega-deals, with a significant increase in the number of $10B+ transactions compared to the same period last year. Globally, M&A deal volume grew 30% year-over-year (YoY) to ~$755B due to a confluence of factors, including anticipated rate cuts, strong corporate earnings, and general market optimism.

On a regional scale, M&A activity rose by 64% in Europe, while the U.S. saw a 59% YoY rebound. Meanwhile, M&A deal volume declined by 40% in the APAC region. Besides the return of the aforementioned mega-deals, the uptick in M&A was also driven by strategic acquirers taking advantage of favorable valuations to complete transformative acquisitions. As was the case in 2023, corporations continued to spin off and divest non-core assets, which also contributed to increased levels of activity. In fact, 2024 is likely to be one of the years with the most corporate separation-driven activity in recent memory.

As was the case in 2023, private equity activity remained muted due to persistently high financing costs. Overall, PE-backed activity fell by 7% to $91B in Q1. Despite record levels of dry powder, there continues to be a mismatch in buyer-seller valuation expectations. However, this may change in the coming months due to mounting pressure from Limited Partners to deploy capital, which may force some firms to pay higher valuations for assets. We will likely only see a true rebound in PE-backed activity once interest rates are cut, a move many anticipate will be later this year.

Despite facing regulatory headwinds, a welcome sign for many involved in the world of M&A was the rebound in technology transactions in Q1, with a 42% YoY increase. Technology M&A also accounted for the largest share of M&A deals last quarter. The quarter’s largest technology transactions included Synopsys’ $35B acquisition of Ansys, Cisco’s $28B acquisition of Splunk, and Hewlett Packard Enterprise’s $14B acquisition of Juniper Networks.

While downside risks remain, including the impact of heightened geopolitical tensions, experts anticipate that M&A activity will materially increase throughout the remainder of 2024 due to stabilizing market conditions. In a recent survey, ~52% of US-based CEOs expect to engage in some sort of merger or acquisition activity within the next 12 months. Looming interest rate cuts should help accelerate the rebound in activity.