Propelled by robust stock markets and undervalued assets following two years of high interest rates in developed economies, global dealmaking activity has posted a sharp comeback in the first quarter of 2024.
According to Dealogic, total M&A volumes climbed 30% globally, driven by the US and Europe, where it jumped a hefty 59% and 64%, respectively.
“Over the last two years, company valuations have come down due to higher rates. That has resulted in a better price point for acquirers and fewer financing options for smaller companies. Now, with the prospect of rate cuts, quality companies can have a more padded valuation, and their ability to access funding from the capital market is also better,” says Li Watsek, an analyst at brokerage firm Cantor Fitzgerald.
The remarkable activity was buoyed by a stack of large deals, primarily in technology, finance, energy, and life sciences. Among those sectors, technology led the rise, with an impressive 42% year-over-year jump to a total of $153.8 billion.
Among the most prominent deals so far are the $32 billion Synopsys takeover of Ansys, Capital One’s $35.3 billion buyout of Discover Financial, and British Pharma giant AstraZeneca’s acquisition of Fusion in the thriving oncology field.
The thriving Q1 activity in several corners of the market has prompted Morgan Stanley to raise its M&A growth outlook for the full year to a hefty 50%. “We think that this ‘winter’ for mergers and acquisitions (M&A) is thawing, and activity is set to return cyclically and secularly,” the behemoth bank said in a note to clients.
M&A activity has also rebounded impressively in Japan and India, mostly on the back of the two countries’ red-hot stock markets this year. In the former, companies capitalized on last year’s thriving activity to post continued growth. In the latter, two mega telecommunications and infrastructure deals of over $1 billion helped push the market to a hefty 78% jump in deal value in January alone.
However, China and Brazil are still the largest economies that have yet to catch up.