7 M&A trends for 2024

These and six other trends emerge from the annual European M&A Study by international law firm CMS.

The research also shows that, despite the difficult macroeconomic environment, conditions for M&A transactions in 2024 are favorable. This is partly due to a gradual stabilization of the market, with lower interest rates and lower inflation.

The seven key findings of the CMS European M&A Study are:

1. Sustained deal activity
Despite geopolitical tensions and economic challenges, 2023 saw a resilient M&A market. This resilience indicates a promising outlook for 2024.

2. Price structures are shifting
There was a notable decline in purchase price adjustments (PPAs) and earn-outs. This indicates a shift towards more stable and predictable deal structures. This trend indicates increasing confidence in the accuracy of valuations and financial stability. However, the reduced use of the locked box in smaller transactions points to continued pricing uncertainty.

3. ESG still on the rise
Although specific ESG due diligence has increased from 33 percent last year to 47 percent, the integration of ESG factors into deal structures remains modest. This is expected to grow as a result of increasing reputational pressure and the introduction of regulations.

4. Increase in strategic investments
A notable number of investors, both buyers and sellers, are rebalancing their business portfolios in response to changing market conditions.

5. Risk distribution
Although standard claim periods for warranties in purchase agreements are decreasing, they generally remain between 12 and 24 months, with a liability limit of less than 50 percent of the purchase price in most cases.

6. W&I insurance stability
The use of W&I insurance in European transactions, especially in larger transactions, has remained consistent with 2022 levels, with the United Kingdom leading the way.

7. Geopolitical and economic factors
The research acknowledges the continued impact of geopolitical tensions and economic uncertainties on dealmaking, but also points to recovering confidence in obtaining loans for acquisitions and possible boosts from election cycles.

Louise Wallace, head of the CMS Corporate/M&A Group, said: “The insights from this year’s research not only highlight the resilience of the European M&A market, but also point to interesting transaction trends in the near future.”

Read also: 10 major insights from the Deloitte Belgian M&A Predictions 2024