Reinventing the mergers and acquisitions market

The stabilizing economy and pent-up demand have helped spark renewed interest in dealmaking. But underneath the surface, select longstanding practices of the merger and acquisition market have been reinvented as a result of creative problem-solving that emerged during the nearly two-year lull.

For a bit of background, record-setting M&A activity in 2021 started running out of steam mid-2022. Activity proceeded to slow in 2023. However, a few Q4 oil and gas mega-deals—valued at more than $50 billion a piece—contributed to the US M&A aggregate dollar value rising 59% in 2024.

This isn’t all to say that the headwinds that drove dealmakers into retreat have gone away (i.e. geopolitical tensions, high debt-financing costs, stricter regulatory oversight, and the undetermined impact of AI). But, innovative approaches to combatting such challenges have emerged in areas like financing, deal structure, and knowledge-sharing.

What do these new approaches look like? And why do dealmakers seem to be gaining confidence in using M&A to achieve strategic or investment objectives?

First, the slower pace of dealmaking gave both corporations and private equity (PE) firms time to turn their attention inward. The Deloitte 2024 M&A Trends Survey indicates that companies were intent on becoming more agile and more technically enabled—and thus even better prepared to partake in dealmaking activity.

This time of introspection led to experimenting with innovative approaches, some of which might become permanent features of a changed M&A landscape. These involve pursuing M&A alternatives (such as strategic partnerships and joint ventures), integrating Generative AI or advanced analytics into their dealmaking processes, and seeking out private credit instead of bank financing.

Second, dealmakers appear to be focused on pursuing well-defined strategies. Per the 2024 M&A Trends Survey, 47% of private equity leaders and 44% of their corporate counterparts prioritized defining a coherent and well-supported M&A strategy as the top factor in seeking and executing deals successfully. Deal valuation ranked second for corporate respondents (41%) and third for their peers in private equity (39%). A combination of leveling interest rates and inflation, the continued strength of the US dollar, and an itch on behalf of PE firms to monetize their aging portfolio companies have renewed interest in using M&A to adapt and transform business models.

Continue uncovering the ins and outs of mergers and acquisitions today by reading our full article.