In 2023, M&A activity took place on the sidelines as we saw the lowest value and number of transactions since 2013. The value of M&A transactions decreased in value by 17% to 2.9 trillion making it the slowest full-year period for deal-making for a decade. There were over 55,200 deals made in 2023 which is a decrease of 6% compared to previous years and was a part of a 3-year low.
The Law Gazette reported that European M&A activity declined more than the global average with a fall of 28% whereas worldwide the decline was 13%.
City Firms especially are now counting on a recovery of M&A activity being driven by private equity along with a search for security.
In 2023, prices became a primary obstacle as sellers did not want to accept the prices potential buyers were requesting. Even the major strategic buyers were sitting on the sidelines and prioritising profitability rather than growth through acquisitions. Capital IQ data shows that Amazon, Alphabet, Apple, and Salesforce made only 4 acquisitions between them in 2023, comparing this to 2022 where 18 were made.
Seeing a rise for 2024
In Q4 of 2023, there were signs of recovery as 10 of the largest deals were announced, igniting hope for more in 2024.
Those that fell into the highest valuations in 2023 were the cybersecurity and AI categories. This will continue to be the highest-value area for transactions in 2024.
Small transactions are expected to make a quicker recovery for 2024 and we will see strategic and financial buyers being more active when it comes to these.
The future of M&A
Technology will be a top choice for dealmakers as Morrison Forester reports that technology accounts for 27% of deal value. Cybersecurity was chosen as the most promising subsector for deals for the year ahead.
With Pfizer's $43 billion takeover of Seagen in 2023, along with Daiichi Sankyo's $22 billion deal with Merck, healthcare was the third-highest sector by volume with North America experiencing its highest-level value ever.
Ambitions for technological advancement through M&A will likely fuel deal activity across multiple industries and allow for M&A to rise from 2023 figures.
Along with Technology, healthcare is also expected to surge in M&A activity as the demand for specialised expertise and innovative solutions is prominent. This will encourage companies to actively seek out acquisitions.
Morrison Forester reports that global private equity deals dropped 33% in volume and 41% in value as sponsors were being cautious in their M&A approach. Sponsors had to adjust their methods of dealmaking due to interest rates, and tightening credit markets which has meant that 91% of PE firms surveyed in the 2023 Tech M&A Survey do expect to use minority investments which is up from 55% from 2022.
In 2024 there will be a shift in strategy for the activity to rise and AI will aid in due diligence, streamlining business operations, identifying potential M&A targets, and automating various tasks associated with deal making.
Energy is also expected to be an area of focus as many turn to M&A to boost their competitive advantage and lead the trend. With the priority set to ESG, companies are looking to M&A transactions to improve and this will allow them to quickly make headway as leaders in the industry. The energy sector is attracting investment from a broad base but their challenge will be thriving in a climate driven by technology along with the climate anxiety felt by society, encouraging companies to make active decisions in favour of the environment.
Financial services are back to prioritising deal-making again in 2024 after the rising inflations and economic uncertainty of the past year. The aim will be to incorporate technology into their industry and create a modern and smooth way to change strategies.
We can expect a much more active year for M&A transactions in 2024.
