M&A activity for 2024 – optimistic about growth
Our 2024 M&A Outlook surveyed over 150 of Ireland’s leading executives and M&A advisers for their insights on trends for the year ahead. The outlook for the year is optimistic about M&A growth, with 78% of M&A leaders planning to pursue M&A opportunities.
89% of M&A leaders expect deal volumes to remain stable or increase, while 39% expect pricing to decrease with some regularising in valuation multiples; this follows an extended period in which heightened competition drove deal multiples to historic levels.
Deal volumes
89% of participants expect deal volumes to increase or remain broadly stable, evidencing confidence in deal activity and the M&A market for 2024. Respondent forecasts for 2023 were less optimistic.
Deal multiples
54% of respondents expect stable valuations reflecting market confidence and a belief that any contraction was already reflected in 2023 transactions. 39% of respondents expect some regularisation in valuation multiples from those seen in 2023.
Pursuing M&A
In a positive outlook for deal activity, 78% of respondents intend to pursue M&A in 2024. A sense that the major economies are at the top of the interest rate cycle coupled with valuation rebasing in some sectors may provide opportunities to unlock attractive deals.
Sector activity
Technology, Healthcare & Pharmaceuticals, and Energy & Infrastructure are expected to be the most active sectors in 2024. 2023 witnessed strong activity across all of these sectors.
Increasingly, we see more positive outcomes from sellers that engage ahead of time on in market readiness and insightful preparatory diligence. This protects value in an environment with expected valuation tightening in what M&A leaders have predicted to be a buyer's market.
Buyers' or sellers' market
For the second year in a row, 67% of respondents anticipate that 2024 will be a buyers’ market. Elevated market volatility is driving lower buyer confidence. The resultant lack of buyers is decreasing the range of options available to sellers.
Shareholder considerations
Expansion of customer base & lines of business and the realisation of synergies were highlighted as the key drivers for M&A activity in 2024 as investors look to unlock value. De-risking and success planning also continue to be strong drivers of activity.
Deal failure
As with prior years, valuation gaps continue to be cited as the primary reason for deal failure. 21% of respondents believe macro considerations are the second most likely driver of deal failure, perhaps reflecting volatility and market confidence.
Diligence activity
Unsurprisingly financial due diligence was selected as the most common type of deal work that will be performed. Respondents highlighted that ESG and IT & Operational diligence continue to increase in importance.
The economic uncertainty in 2023 challenged dealmakers and resulted in a reduction in deal volumes from the historic highs of previous years. 2024 has commenced with notes of optimism for M&A driven by decreasing concern about inflation, positive views on the interest rate cycle and the availability of capital.
Access to financing
87% of M&A leaders cited the availability of financing as ‘adequate but with some constraints’. This somewhat muted response may reflect the impact of higher interest rates on the debt capacity of acquisition targets.
Interest rates
Property and construction was highlighted as the sector most sensitive to interest rate movements which is expected with leveraged commercial property portfolios and heightened build costs. Other industries noted as having a pronounced impact are listed below.
Inhibitors to M&A
66% of M&A leaders identified availability/cost of financing as the primary obstacle facing deal activity. While a subsequent response in relation to access to financing provides caveated confirmation that funding is available, responders’ views on the inhibitors highlight that formulating an executable funding strategy will be key to M&A success in 2024.
Debt funding
The significant majority of dealmakers expect to fund less than 50% of a deal using debt. This relatively conservative position may reflect the strength of corporate balance sheets and the perceived constraints on the availability of debt due to elevated interest rates.
Greater deal making
29% of M&A leaders highlighted awareness of targets as the greatest enabler of dealmaking in 2024 followed by speedy access to financing. As in prior years, strong networks will need to be maintained to ensure market knowledge.
Financial or strategic buyer
63% of respondents expect strategic buyers to be most active in 2024 as companies seek to strengthen their operations to achieve growth ambitions. The strong prediction for private equity (37%) reflects the increasing growth of the sector and the abundant dry powder.
The pursuit of technological advancement through acquisition is expected to drive a wave of activity in 2024 with companies seeking to integrate AI and Cybersecurity into their operations, particularly in technology led sectors.
Download M&A Outlook 2024
Get in touch
If you have any queries on the topics raised in this year's M&A Outlook 2024 report, please get in touch with our Deal Advisory team below. We'd be delighted to hear from you.
