M&A activity is off track globally this year

Global M&A agreements have yet to show “a sustained recovery,” despite a surge in transaction volumes at the start of the year, according to data compiled by Bloomberg. “The year has been good so far, but all indications suggest it should have been great,” Guggenheim Securities Global Head of M&A Eric Rutkoske told the business information service, adding that “there has been a deceleration” in activity despite “macro indicators actually [getting] better throughout the year.”

Increased M&A activity came on the back of expectations that central banks would slash interest rates, but faltered after the Federal Reserve projected a single rate cut this year. “It’s really wait-and-see mode until we understand what direction of travel we’re in and what that means for the broader economy. That’s what’s keeping some folks on the sidelines,” JPMorgan Chase & Co Co-Head of North America M&A Ben Carpenter said.

Global M&A transactions stood at USD 1.4 tn in 1H 2024, up 14% y-o-y, but still over USD 300 bn below the 10-year average for the first half of the year. The energy sector stood center in most M&A activity in 2024, with transaction values in the sector up by over 40% during the year. Technology companies were also “heavily targeted by both strategic and private equity buyers,” while dealmaking in healthcare came to a standstill in favor of smaller private transactions.

Higher borrowing costs and rising stock markets are to thank for halted negotiations: “Buyer and seller valuation mismatches have narrowed but they haven’t been completely bridged, and while capital is increasingly available, it’s still very expensive,” said Evercore Inc Senior Managing Director and Co-Head of US Investment Banking Naveen Nataraj.

It’s unlikely that activity will pick up again before November, with bankers and lawyers predicting that some companies will wait for the results of the US election in November before deciding whether or not to pursue transactions. “There’s a view that the regulatory policy could change meaningfully so there are a lot of larger transactions that companies may wish to start under a new administration,” said Rutkoske.

THE CLOSING BELL-

The DFM rose 0.1% yesterday on turnover of AED 360.7 mn. The index is down 1.25% YTD.

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