2024: A Year of Dynamic Dealmaking

Following a year of cautious observation, 2024 is emerging as a pivotal period for U.S. mergers and acquisitions (M&A). The latest midyear EY-Parthenon Deal Barometer anticipates a 20 % increase in corporate M&A deal volume compared to the previous year, nearly doubling the 12 % growth forecasted in January.

Private equity (PE) deal volume is also expected to rise by 16 % year-over-year, surpassing the initial 13 % prediction. By the end of April, EY reported a 69 % increase in deal value and a 22 % rise in deal volume for transactions over $100 million.

The Deal Barometer, a joint effort between EY’s chief economist Gregory Daco and leaders from EY Strategy and Transactions, uses historical economic and financial data to project future trends in M&A and PE activities. Mitch Berlin, vice chair of EY strategy and transactions in the Americas, plays a key role in advising CEOs and boards on strategic dealmaking.

In the past three years, dealmaking has seen significant fluctuations, reaching record highs in 2021 and early 2022 before plummeting in March 2022 due to the Federal Reserve’s aggressive policies to control inflation.

The EY-Parthenon midyear analysis predicts a notable increase in deal activity this year, while still keeping an eye on inflation. Data from EY Macroeconomics indicates that U.S. economic activity remains strong, and the April EY CEO Outlook survey highlights a growing number of CEOs planning acquisitions and divestments.

The survey revealed an optimistic outlook for M&A in both corporate and PE sectors for 2024. CEOs view dealmaking as a crucial strategy to address immediate priorities, such as acquiring technology, new production capabilities, or innovative startups. They are also reassessing their current assets and operations to align with long-term goals. The report noted a significant rise in plans to divest assets over the next year, a trend observed across various regions and sectors, reflecting CEOs’ efforts to prepare for future challenges.

Scott A. Scanlon, founder and CEO of Hunt Scanlon Ventures, highlighted that the EY deal tracker projects a substantial increase in corporate M&A deal volume this year, recovering from a 17 % drop in 2023 and nearing pre-pandemic activity levels.

The EY-Parthenon optimistic scenario suggests a 31 % year-over-year increase in deals, while a more conservative scenario predicts a 13 % rise. For private equity, the Deal Barometer expects a 16 % year-over-year rebound in U.S. PE deal volumes after a 15 % decline last year. Although still below the 2021 peak, this growth surpasses the average annual pace of 9% from 2010 to 2019. In an optimistic scenario, PE deal volumes could rise by 23 %, whereas a conservative scenario forecasts an eight % increase.

Despite stringent monetary policies, the U.S. economy shows resilience, with low recession risks, according to Scanlon. Companies are leveraging M&A for consolidation and expansion, which were key drivers for dealmaking in April, as reported by EY-Parthenon.

By April 30, 429 large deals (over $100 million) amounting to $657 billion were recorded in the U.S., marking a 22 % increase in volume and a 69 % jump in deal value compared to the previous year. April alone saw 111 large deals totaling $131 billion, compared to 76 deals worth $101 billion in April 2023.

Key sectors driving M&A activity this year include technology (113 large deals totaling $154 billion), life sciences (72 large deals totaling $96 billion), and energy (64 large deals totaling $152 billion). The surge in larger deal activity underscores growing confidence in the M&A market as the macroeconomic outlook stabilizes, prompting major companies to undertake strategic actions to enhance profitability and foster innovation.

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