The deal market in 2024 is likely to witness a revival from the challenges of 2023. The market for deals in 2023 is likely to see an improvement from the challenges of 2023.
However, a range of factors will hinder the process of negotiating deals. The first reason for the slowdown in M&A activity is due largely to capital shortages. In the wake of rising interest rates, they have changed the economic landscape and have made it less attractive to invest in growth through acquisitions or new investments. This is especially relevant for the US which accounts for a significant portion of the global deal value with two-thirds of the top 100 deals of 2021 featuring the US firm as either the bidder or as a target.
The second reason is that increased scrutiny from regulators is limiting M&A. Concerns over national security, antitrust, and other issues are putting more scrutiny on larger deals and limiting the scope for industry consolidation. The trend is expected to continue until 2024.
Thirdly, the focus on generative AI (GIA) will lead to more capability-building M&A. M&A will be used making informed choices by companies who do not have the resources or time to build GIA capabilities internally. Additionally, the environmental governance, social, and governance (ESG) agenda is continuing to gain traction among CEOs. Increasingly, they will seek to increase the effectiveness of ESG initiatives through acquisitions which will assist them in achieving their earnings, growth and valuation goals.