Outlook for global M&A market in 2024

Two years after the global M&A market hit an all-time high in 2021, it is recording its second weakest M&A year in exactly a decade. Data supplier Pitchbook announced this in the annual Global M&A report.

The total value of deals closed or announced in 2023 will be exactly three trillion dollars, a decline of 15.8 percent from 2022. The good news is that the pace of decline appears to be slowing, Pitchbook said.

Excluding the 2020 global lockdown, deal values have not been as weak as they were last year since 2013. Excellent results were achieved though in terms of the number of deals closed or announced (deal volume). When the dust finally settles, Pitchbook estimates that more than 40,200 mergers and acquisitions will be announced or completed in 2023, which would be the third-highest single-year total ever.

However, the global value of M&A transactions has fallen 35.5 percent from an all-time high in 2021. The big question among M&A professionals and companies right now is whether the current downward cycle will last another year. Since the 2007 downturn during the global financial crisis, the M&A market has not declined for three consecutive years. For historical reference, this decline was 60 percent in deal value before bottoming out in 2009, concurrent with a 29.3 percent contraction in deal numbers.

Pitchbook predicts that this will not happen. They view the last quarter of 2023 as the latest sign that the deal market is slowly recovering. What will help is the expected new cycle of interest rate easing by the Fed. This would bring welcome relief to the large numbers of financial buyers and get the 1.6 trillion dollars in dry powder of private equity investors moving again. Of course, not everything goes as expected and if the global economy lands hard rather than soft, mergers and acquisitions will likely be lower, just as they were in 2009 when central banks aggressively cut interest rates.

2023 saw some recovery in valuations
Transaction multiples in North America and Europe are showing signs of stabilization, Pitchbook further reports. The average EV/EBITDA multiple for mergers and acquisitions announced or completed in 2023 was 9.3x, a modest improvement from the 8.9x recorded in 2022. The current average is 15.5 percent away from the all-time high of 11.0x in 2021 and still below the 10.0x average that prevailed during the three years heading into Covid year 2020.

The performance of the European M&A market in 2023
In Europe, the number of deals in 2023 was still 20 to 30 percent higher than pre-2021 levels. Essentially, we saw resilience in deals, but especially in the lower segments, as evidenced by deal value declining proportionately more than number of deals. Financial services were an exception in terms of deal value; it increased by 20.2 percent year on year. The takeover of Degroof Petercam fits into this trend.

Outlook 2024: more deals, fewer IPOs
Looking to 2024, Pitchbook expects interest in M&A to return and lead to growth, especially as the last monetary tightening cycle comes to an end and markets expect rate cuts in 2024. This will fuel mergers and acquisitions and stimulate economies across the continent.

Another factor at play is the drought in stock market listings in 2023, with sponsors instead moving to corporate or private equity buyout funds through mergers and acquisitions. Despite the better growth prospects, Pitchbook does not expect a significant recovery of stock exchange listings in Europe in 2024. Therefore, mergers and acquisitions will remain the most important means of monetizing that growth. However, risks to rising mergers and acquisitions in 2024 include persistent inflation, fears of recessions and persistent geopolitical risks.