M&A Trends and Outlook for 2024

After three volatile years, rife with challenging macroeconomic conditions—from a global pandemic and wars to far-reaching supply chain issues—the M&A space has its fair share of ups and downs. 

2020 ushered in unprecedented uncertainty and transformation, as businesses worldwide scrambled to adapt to shutdowns amidst a global pandemic. As the world steadily began to recover in 2021, M&A activity boomed and investor confidence rose Following this moment of M&A prosperity, there was another steep dropoff after Q2 2022. As high inflation, rising interest rates, and geopolitical uncertainty hindered dealmaking, lower share prices made it more difficult for acquirers to pay for acquisitions. And despite a slow start to Q2 2023, deals picked up as CEOs begin adapting to the new realities of dealmaking—stricter regulation, expensive funding, and wider valuation gaps.

Now, coming out of 2023, the appetite for dealmaking is higher than ever, even as economic volatility prevails. According to the latest EY CEO Outlook Pulse Survey, 98% of CEOs plan to pursue a strategic transaction in the next 12 months—last January, the number was at 89%.

Historically, M&A tends to slow down during times of economic volatility or uncertainty, but often these are the times when valuations become more attractive and new opportunities begin to emerge. 2023 has already set up ideal conditions for dealmaking due to valuation resets, lessened competition for deals, and new assets coming to market. 

While increased deal regulation and a higher cost of capital could prevent some deals from crossing the finish line, the overarching trend of incorporating technology and innovation into deal strategy—as well as using M&A to enhance tech capabilities—will likely balance out these headwinds. M&A dealmaking now requires an ever-larger amount of information to be captured, analyzed, and interpreted, meaning the ability to harness the power of artificial intelligence (AI) has become imperative to maintain a competitive edge. 

Whether you are a corporate dealmaker interested in competitive landscaping and strategically growing your business, a consultant seeking validation for M&A recommendations, or a financial services professional in need of jumpstarting idea generation for portfolio expansion—these trends and outlook for 2024 directly impact your bottom line.

Using the AlphaSense platform, we uncovered the key trends, unique opportunities, challenges, and factors shaping the M&A space in 2023, as well as how they translate into an outlook for 2024 and beyond.  

2024 Mergers and Acquisitions Trends at a Glance

1. After a slow start in 2023, deal activity and flow appear to be stabilizing and are likely to grow at a steady pace in 2024. 
2. With the rise of generative AI, more and more companies across industries are prioritizing deals that enable them to add tech capabilities and be at the forefront of the AI revolution..
3. Increases in enforcement and legislation in the US are affecting how companies enter deals.
4. Small to midsize M&A deals are on the rise as valuations reset.
5. PE firms are sitting on a record amount of dry powder, which will likely spur M&A opportunities in the near future.
6. Cross-border M&A deals are becoming more popular for growth-focused companies.
7. Around the world, investors are favoring companies with demonstrated commitments to environmental, social, and governance practices, as well as clear ethical values. 

M&A Trends by Industry

Healthcare

The COVID-19 pandemic ushered in a wave of unprecedented innovation, progress, and transformation to the healthcare industry in 2020. Three years later, despite macroeconomic uncertainties, investors remain attracted to this space, particularly the more innovative and tech-influenced sub-sectors like biotech and medtech. 

At the same time, healthcare companies remain bullish on the opportunity to grow through M&A. Many pharma companies with expiring patents are on the hunt to acquire biotech companies to address gaps in drug pipelines and get a competitive edge.

The medtech space has been dealing with an investment downturn since 2022 that has persisted throughout 2023, largely due to post-pandemic headwinds and macroeconomic factors. But the current pace of innovation, particularly in digital technology and AI, promises an uptick in investment in the near future. 

With the current heavy focus on value-based care—a medical philosophy that focuses on improving outcomes and reducing costs for patients—many hospitals and health systems are merging to gain scale, reduce costs, improve their negotiating power with payers and suppliers, and gain the ability to invest in new technologies and services.

Technology, Media, and Telecommunications (TMT)

In 2022, the tech sector underwent a sharp downturn, with mass layoffs, hiring freezes, a collapse in IPOs, a bear market in tech stocks, and a sharp drop in venture-capital funding. But 2023 brought a resurgence in enthusiasm for tech, as artificial intelligence—and generative AI in particular—emerged as a hot topic for professionals and investors across industries. This means tech companies are currently bullish on M&A opportunities that will enable them to stay competitive and expand their AI capabilities. Experts predict that thousands of new AI startups will begin sprouting up in the next couple years, and they are all likely to become M&A targets for larger tech companies. 

Additionally, there is an increasing overlap between the technology sector and other sectors, as more and more industries move toward digital transformation and begin incorporating technologies like, cloud computing, 5G, and generative AI, into their strategies. Technology companies are also increasingly looking for opportunities in the healthcare space, as subsectors like medtech and medical devices are currently on a steep upward growth trajectory. 

Still, big tech companies remain more conservative than in years past, as they contend with pressure from regulators, persistent inflation, and geopolitical tensions around the world. Many are still trying to implement cost-cutting measures to counterbalance macroeconomic setbacks and post-pandemic over-hiring. 

While tech M&A is still in a transitional phase, largely due to global macroeconomic uncertainties, M&A activity is expected to accelerate as companies seek to competitively differentiate themselves and acquire the best talent. Already, deal volume and size are slowly increasing and this trend is expected to persist into next year and beyond. 

Energy

The energy transition continues to be a major area of focus for energy companies, with many turning to M&A to boost their competitive advantage and position themselves as leaders in this trend, according to Morgan Stanley. Additionally, ESG remains a priority, with M&A serving as a proven way to improve ESG practices through new capabilities like carbon capture. 

Since energy transition objectives are a key priority for businesses across all industries, the energy sector is attracting significant investment capital from a broad investor base looking to execute on this via M&A. Looking ahead, the biggest challenge for energy companies will be learning how to thrive in a technologically driven, low/no-carbon environment that is focused on ESG.

Industrial, Manufacturing & Automotive

The COVID-19 production shutdowns, followed by the 2022 semiconductor shortage, dealt a heavy blow to the industrial, manufacturing, and automotive industries. These challenges only further illustrate the need to build more resilient supply chains, and company leaders today are looking for ways to domesticate the supply of critical components and lessen their reliance on cross-border suppliers. Hence, M&A remains an appealing strategy in doing so.

Deal activity has been stable in these sectors throughout 2023, and deal volume is expected to remain steady going into 2024. In the automotive industry, certain core commodities and logistical costs lessened this year from their extreme levels in the previous two years, helping reduce margin volatility. In this sector, M&A is largely driven by the hyper-competitive environment that new emerging technologies and the ongoing transition to electric vehicles are facilitating. 

For industrial and manufacturing companies, investment in digital capabilities (such as automation and AI) and reshoring are consistent themes driving M&A strategy. Building efficiencies and resilience into their supply chain through digital investment is a major priority, in order to minimize supply chain risk and maximize capabilities. Additionally, CEOs are turning to transformative acquisitions to keep pace with markets that are being reshaped by technological innovation and geopolitical unrest. These types of acquisitions can help reposition and reinvent their businesses for long-term success. 

At the same time, renewable energy and the energy transition are just as much of a focus for many industrial companies as they are for energy companies. Consequently, many companies in the commercial space are expected to ramp up R&D efforts, as they strive to meet their goal of net-zero carbon emissions by 2050—increasing interest in M&A as a means of doing so. 

Financial Services

Banking and capital markets M&A activity was hard hit by the rising inflation, interest rate hikes, and overall economic uncertainty of 2022. Additionally, there has been increased regulatory scrutiny on M&A activity by large banks. As a result, many banks, PE firms, wealth and investment managers, and fintechs halted M&A activity. 

Since then, however, dealmaking has once again become a top priority for CEOs in financial services. The primary drivers for M&A in this sector are improving tech capabilities, bringing in differentiated skillsets, and expanding into new geographies. 

Digital transformation remains top of mind for financial institutions—with disruptive fintech companies setting the pace for rapid technological change, banks are eager to keep up. Just as tech remains a profitable and opportunity-rich space in a downturn, fintech follows a similar pattern. CEOs are increasingly incorporating AI into their M&A strategies, particularly through target selection and due diligence. 

Private equity firms are now more specialized in industries and sub-sectors, and as such, are more confident investing consistently through the ups and downs of the business cycle. While 2023 saw a dramatic slowdown in investments, PE firms are still focused on raising capital at a rapid clip, and are currently prioritizing exits and divestitures.

Related Reading: Private Equity Trends and Outlook for 2023

ESG is also playing an important role for PE investors, who are increasingly relying on pre-deal due diligence in M&A dealmaking. The idea here is that the more prescriptive investors are in their approach to ESG, the better they can manage risk and derive value from investments.

Global M&A Trends

United States

The US M&A market was heavily affected by several key headwinds in 2022—increased scrutiny from regulators, rising interest rates, global tensions, and stock market volatility—which affected deal flow well into 2023. However, in the second half of 2023, there was a substantial rebound in deal volume, and the U.S. is currently contributing to a larger-than-usual share of global activity, which is helping offset the decline in volume in European and APAC regions. 

M&A experts predict that deal flow in the U.S. will continue at a stable, steady pace throughout 2024. Industries of all kinds are feeling the pressure to keep up with the speed of business transformation, and M&A remains a powerful way to maintain a competitive advantage. That said, no M&A boom appears imminent as the United States.—like most other regions—is still dealing with regulatory and macroeconomic headwinds.

United Kingdom

Similar to the rest of the world, the UK is dealing with a number of headwinds that have persisted since 2022, among which are high inflation, macroeconomic turbulence, a potential recession, geopolitical instability in Europe, and regulatory uncertainty. 

Still, the UK and Ireland are expected to have the highest growth in M&A activity next year, according to the European M&A Outlook 2024 report published by law firm CMS. Interest rates have finally reached their peaks and are expected to start coming down, which means buyers and sellers can better assess market conditions and make more accurate business valuations.

Additionally, dealmakers are keen to complete transactions before the next general election in 2025, since an increase in capital gains tax is likely with administrative changes.

There is also concern among dealmakers that the UK’s regulatory environment is a hindrance to M&A, especially since the Competition and Markets Authority (CMA) has gained greater power since Brexit. However, the CMA’s increased scrutiny does not seem to be deterring potential buyers and sellers from making deals in 2024. 

Canada

Canada is continuing to deal with the residual challenges of 2022—inflation, rising interest rates, the Russia-Ukraine War, a lack of stability in commodity prices, and the looming potential of a recession. 

Additionally, the banking crisis that was kicked off by the collapse of Silicon Valley Bank has tightened credit markets, making funding difficult for deals and creating a more cautious attitude around M&A. But the second half of 2023 has seen a resurgence in stability that is expected to carry into 2024. 

There has also been a significant increase in cross-border deal activity, particularly inbound from Australia to Canada in the mining sector. This will likely lead to greater regulatory scrutiny in the near future. 

Generative AI is also generating a great deal of interest, and M&A deals in this area are likely to accelerate. Additionally, agribusiness is likely to drive deals, as food security, inflation, and supply chain concerns persist.

Japan

The total value of M&A transactions with Japanese companies grew 14% YoY in 2023, making Japan the only major global market that recorded growth this year. This trend is likely to continue into 2024, as there are currently multiple billion-dollar opportunities in the pipeline. Additionally, various headwinds that had previously been slowing down deal activity in the region—such as excess employment issues and reluctance toward unsolicited takeovers—are subsiding. 

Peter Armstrong, a partner at DLA Piper, predicts favorability for opportunities that address energy and economic security and believes they will make up the majority of domestic M&A activity, particularly technology, supply chain consolidation, and energy transactions. Japan is heavily committed to the energy transition, so significant investments are expected in the areas of hydrogen test projects and offshore wind. 

Most Japanese companies are currently focused on domestic restructuring, and M&A is a powerful way to do so while increasing profitability.

China

In the face of macroeconomic uncertainty and regulatory risks, China’s M&A fell to its lowest level since 2014. With exceptionally soft conditions for deal processes continuing, the decline has persisted throughout 2023. Still, with China’s zero-COVID policy coming to a close, experts expect a major economic recovery in the not-too-distant future. 

Like most other nations, China is eager to upgrade its technology across various industries, and with the US tech ban expanding, China’s tech companies are keen on reducing import dependency. This is becoming a selling point for many domestic startups, as domestic M&A deals are expected to outperform cross-border deals this year due to persisting macroeconomic challenges and regulatory scrutiny.

Latin America (LATAM)

The M&A landscape in Latin America is heavily influenced by both domestic and international macroeconomic events. For example, Brazil saw a slowdown in deals in 2022 that is set to continue well into 2023 as a result of their polarizing presidential election. Even so, Brazil is still the most important M&A market in Latin America, due to its diversified economy, strong financial system, large consumer market, and solid business opportunities—positioning it well to attract investor attention in sectors most affected by digital transformation.

Emerging markets in LATAM are also deeply impacted by the current slowdown in China, driving additional M&A opportunities in the region as investors seek to reallocate funds. 

Ana Toral, a correspondent for Chile and Ecuador at Mergermarket, says: “The rising cost of capital combined with recession fears, inflation woes, and regional political uncertainty has led dealmakers to become more cautious and prioritize investments in companies that have sought to increase their profitability, a trend that is likely to remain in place in 2023 in Latin America.”

India

Of all the regions discussed in this article, India has one of the most bountiful M&A landscapes this year. Even while dealmaking dropped off in other regions in 2022-2023, M&A deal volume and value reached historic highs in India. The main factors behind this surplus are: corporate balance sheets are solid, private equity has ample dry powder to deploy, India has become a global hotspot for non-US capital, and conglomerates are increasingly turning to M&A to win future profit pools. 

The forward momentum of M&A activity is slated to continue in India, with global markets standing at the ready to double down on India as an attractive long-term opportunity. 

As in most other regions, the energy transition and “green investing” are ushering in plenty of new M&A opportunities. Also, companies are increasingly pursuing “scope deals” as opposed to “scale deals”, shifting the focus onto building out new capabilities and value drivers instead of simply expanding revenue in the core. This, combined with an increased number of first-time acquirers, raises the bar for companies and investors to get their M&A strategy just right—which includes advantaged sourcing, transaction excellence, and integration/value capture.

Middle East

Like India, the Middle East has demonstrated tremendous resilience in deal activity in the last two years. The region’s sovereign wealth funds and state-owned entities have been especially active. Dealmaking is largely driven by the desire to economically diversify and gain digital competencies. 

ESG is becoming an increasing focal point in dealmaking for this region, particularly as many governments are taking steps to diversify local economies away from hydrocarbons. As these corporations remain eager to stay on the leading edge in terms of technological advancements, the TMT sector has become a lucrative hotspot for M&A activity—with cybersecurity, cloud computing, and e-commerce emerging as increasingly attractive areas for investments.

The energy, mining, and utilities (EMU) sector, a classic area of interest for this region, is still operating business-as-usual in regards to dealmaking, according to M&A practitioners. 

M&A Outlook in 2024 and Beyond

The M&A environment is still recovering after the 2022 downturn. But despite the dip, it appears to have turned the corner in early 2023. With inflation slowing down, interest rates peaking, and the US debt ceiling crisis averted, dealmaking is becoming appealing once more. 

Additionally, with the current abundance of dry powder and a growing convergence between buyer and seller pricing expectations, we are expecting an influx of new deals next year. In particular, the biggest dealmaking themes we expect to see in 2024 are digitalization, decarbonization, supply chain resilience, and value creation. 

Digitalization – The generative AI boom has put digital transformation at the forefront of most executives’ and investors’ minds. Dealmakers are racing to stay on the leading edge of this new trend, as it has the power to move markets. M&A remains one of the most effective means of acquiring new technology and talent to fuel this digital transformation. Corporations are likely to seek out opportunities to invest in targets in the cybersecurity, cloud computing, and AI spaces.

Decarbonization – As in 2023, there will continue to be a strong focus on the renewable energy space and meeting energy transition targets. According to Patrice Viaene, Counsel in the M&A Infrastructure Team of Clifford Chance: “Investment will be driven by a desire to capitalize on emerging technologies that could have global applications as we strive to become carbon neutral.”

ESG will continue to play a massive role in worldwide and industry-wide dealmaking. Corporations will be looking to M&A as a way of amping up their ESG scores, especially as investors scrutinize businesses on their commitments. 

Supply Chain Resilience: Corporations are also staying focused on building supply chain resilience, which could look like nearshoring, friend-shoring, and other regionalization strategies—M&A remains a powerful means of executing on those goals.

Value Creation: Tying the above themes together, value creation will continue to be a top priority for buyers. Now more than ever, there is a need to identify transformational value drivers to help realize each deal’s full potential.

Experts warn that despite the promising conditions expected in 2024, there are still challenges to contend with—such as a higher cost of capital and regulatory scrutiny. And even though certain sectors and geographic regions have been less affected by the M&A downturn, we are still in a period of uncertainty. 

In this uncertain environment, smaller, mid-market deals are more likely than larger ones. Corporates with strong balance sheets and established M&A processes will continue to have a competitive advantage. Megadeals are particularly likely in the life sciences, energy, and utilities industries, as these industries are particularly affected by trends like digitalization, decarbonization, and technological innovation.

Overall, the outlook for 2024 is cautiously optimistic. Conducting thorough due diligence, keeping up to date on macroeconomic trends and regulatory updates, and prioritizing sustainable business transformation and AI remain some of the best ways to ensure success in M&A and other strategic ventures—regardless of how the markets are moving.

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