Thanks to resilient equity markets and undervalued assets, global deal activity returned sharply in the first quarter of 2024 after two years of high interest rates in developed countries.
According to Dealogic, overall global mergers and acquisitions grew by 30%, led by the US and Europe, where they grew by 59% and 64% respectively.
“Company valuations have declined over the past two years due to higher rates. This has resulted in better pricing for buyers and fewer financing options for smaller companies. Now, with the prospect of lower rates, quality companies may command higher valuations, and their ability to access capital market funding also improves,” said Lee Vacek, an analyst at brokerage firm Cantor Fitzgerald.
This remarkable activity was supported by a number of large deals, primarily in the technology, financial, energy and life sciences sectors. Among these sectors, technology led the way, with an impressive 42% year-on-year jump to a total of $153.8 billion.
Some of the most notable deals so far include Synopsys’ $32 billion acquisition of Ansys, Capital One’s $35.3 billion purchase of Discover Financial, and British pharmaceutical giant AstraZeneca’s acquisition of Fusion in the thriving oncology field.
Strong first-quarter activity across several market segments prompted Morgan Stanley to raise its full-year M&A growth forecast to a whopping 50%. “We think this mergers and acquisitions (M&A) winter is thawing and activity will return cyclically and over the long term,” the bank giant said in a note to clients.
Merger and acquisition activity also recovered impressively in Japan and India, largely on the back of red-hot stock markets in those two countries this year. In the first case, companies took advantage of the booming performance of the past year to record continued growth. In the latest case, two telecom and infrastructure mega-deals worth more than $1 billion helped the market soar 78% in deal value in January alone.
However, China and Brazil are still the largest economies that have yet to catch up.