Strong Start to M&A Activity in 2024

09 Sep 2024 Strong Start to M&A Activity in 2024

M&A activity in 2024 is off to a strong start, as deals reached $535 billion by June – a nearly 30% increase from the same period last year. This growth is fueled by emerging opportunities in areas like AI and the transition to renewable energy, prompting major companies to make strategic moves.

Timing is everything in the cyclical world of M&A. When activity starts to pick up, it’s wise to move early rather than waiting. By acting swiftly, businesses can capitalize on prime opportunities before competition affects costs.

In this article, we’ll explore the key trends in M&A so far in 2024, offering insights into economic conditions and industry-specific developments.

Economic factors influencing M&A activity

The economic environment in 2024 is marked by cautious optimism. Interest rates and inflation have stabilized after a period of fluctuations, making it easier to plan and finance deals. However, market volatility continues to impact how deals are valued and structured.

Businesses with strong financial foundations are well-positioned to take advantage of these conditions, using acquisitions to strengthen their market position or diversify their operations.

Private equity firms are also playing a significant role in the M&A landscape. Despite somewhat restrictive traditional lending conditions, private equity has the capital reserves to finance deals that might be out of reach for other companies. These firms are driving many “take-private” transactions, although the IPO market has also shown signs of revival.

For businesses, this means that M&A opportunities are ripe, but careful planning and strategic positioning are essential to capitalize on the available opportunities.

Where are the deals: industry-specific trends

Technology

The technology sector remains a focal point for M&A activity. A notable example is Synopsys‘ recent acquisition of Ansys for $35 billion. Synopsis, known for its chip design software, and Ansys, a leader in electronic systems evaluation software, are combining forces in one of the largest cash-and-stock deals since Broadcom’s acquisition of VMWare in 2023.

The technology sector is expected to see continued M&A activity, particularly in areas like AI, cybersecurity, and cloud computing. As companies strive to stay competitive and innovative, acquiring cutting-edge startups and technologies will likely remain a strategic priority.

Healthcare

The healthcare industry is experiencing a wave of consolidation. In the biopharma sector, which has accounted for 58% of the deals so far in 2024, notable acquisitions include Vertex Pharmaceuticals’ purchase of Alpine Immune Sciences and Ono Pharmaceutical’s acquisition of Deciphera Pharmaceuticals.

Hospital mergers are also on the rise, with 31 deals announced in the first half of the year alone. However, some of the most notable activity revolves around the development of GLP-1 drugs, which treat Type 2 diabetes and promote weight loss. A standout deal in this space is Roche’s acquisition of Carmot Therapeutics.

Looking ahead, the healthcare sector is expected to continue its trend of consolidation with companies pursuing M&A to enhance their capabilities, streamline operations, and expand their reach. The ongoing shift toward digital patient care and data management is also a key driver, pushing healthcare firms to integrate new technologies and secure their sensitive data.

Energy

The energy sector, particularly in renewables and natural gas, has seen robust M&A activity driven by the global push toward sustainability and carbon reduction. Companies are increasingly focused on acquiring assets that align with their environmental, social, and governance (ESG) strategies.

A key example is Diamondback Energy’s $26 billion acquisition of Endeavor Energy, combining two major Texan oil and natural gas firms. Another significant deal is ConocoPhillips’ $35.6 billion acquisition of Burlington Resources, which strengthens ConocoPhillips’ position in natural gas exploration and production, primarily in North America.

The sector is expected to remain a hub for M&A activity, with a strong focus on renewable energy. For businesses in the energy sector, this means prioritizing deals that expand market presence and align with long-term sustainability goals.

Finance

The finance sector is also experiencing significant consolidation. A prime example is the recent merger between Capital One and Discover, an all-stock transaction valued at $35.3 billion. This merger brings together two of America’s largest credit card companies, creating a financial powerhouse with nearly $625 billion in domestic assets.

The finance sector is likely to see continued M&A activity focused on mergers that enhance digital capabilities, expand customer bases, and create synergies that improve operational efficiency.

Industrial products

Industrial product companies are also positioned to benefit from trillions in capital flows from government initiatives in infrastructure and defense. This influx of capital is expected to spur significant M&A activity in the sector.

One notable example is Carrier Global’s $13.1 billion acquisition of Viessmann Climate Solutions, a German-based manufacturer and supplier of heating, industrial, and cooling systems for commercial applications. Viessmann’s renewable climate solutions provide Carrier with a differentiated market advantage, particularly in the rapidly growing renewable energy space.

Construction

The construction sector has been an unexpected hotspot for M&A activity in 2024. A key example is Home Depot’s $18.25 billion acquisition of SRS Distribution, a leading materials provider for professional roofers, landscapers, and pool contractors.

The sector’s unexpected growth is largely driven by current housing market conditions. With shortages in new home construction and rising prices, the demand for professional building services is increasing. This trend is pushing companies in the sector to consolidate and expand their capabilities to meet the growing demand.

Regulatory and compliance considerations

Governments and regulatory bodies, particularly in the U.S., are intensifying their scrutiny of M&A deals, with a keen focus on issues like antitrust, data privacy, and cross-border transactions. This heightened oversight is evident across most sectors, notably in technology and healthcare, where the potential for market dominance and data security concerns are especially high.

A recent example of this trend is Google’s loss in a major antitrust case in August 2024, the first such case to reach trial in decades. This ruling signals that even the largest and most powerful companies are not immune to regulatory challenges.

In this environment, due diligence processes need to be more robust and thorough than ever. Businesses must be prepared for intense scrutiny, making it essential to work closely with accounting firms and legal advisors who can ensure compliance and identify potential risks.

Take action: consult an experienced CPA

If your business is considering a merger or acquisition, it’s crucial to engage with an experienced CPA as early as possible in the process. M&As require careful planning, thorough due diligence, and an ability to adapt to rapidly changing market conditions.

A knowledgeable CPA can help you navigate the complexities of deal structures, assess the financial implications, and ensure compliance with regulatory requirements. Contact one of our expert advisors, and we’ll help you make informed decisions that align with your strategic goals and maximize the value of the transaction.

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