The 2024 Mid-Year Report on Corporate Mergers and Acquisitions (M&A) shows that businesses are now pursuing two strategies of reducing costs and increasing growth simultaneously.
According to Iran digital economy annotation, in the first half of 2024, two sectors, energy and technology, had the most activity. In the energy sector, the focus has been on larger mergers, and in the technology sector, the focus has been on growth-oriented deals.
As economic problems such as high interest rates, inflation and political issues continue, companies have found new ways to adapt. Most importantly, companies are now looking for deals that both reduce costs and grow.
The global market for strategic mergers and acquisitions by the end of May 2024 recorded the value and volume of deals at a similar rate to the performance of the second half of 2023. The total value of transactions has increased by 24% compared to the beginning of 2023, which was weak. It appears that private equity (PE) and venture capital have bottomed out and are recovering.
However, financiers have not yet succeeded in achieving the desired growth rate in the face of high borrowing costs, slow exit speed, and funding challenges. From a regional perspective, the Americas and Europe, the Middle East and Africa have returned to merger and acquisition activity, while the Asia-Pacific region is in the midst of another down year.
The second chart analyzes the value of strategic mergers and acquisitions of companies. In general, the value of transactions increased during the period under review. This shows that companies have become more willing to do larger and more valuable deals. The compound annual growth rate (CAGR) of 24% at the top of the chart means the average annual growth of the transaction value in the specified period. This number shows that the value of transactions has increased by an average of 24% per year.
Chart three examines the performance of different regions of the world, according to which the American region experienced the highest growth in terms of mergers and acquisitions with a growth of 38%. Europe, the Middle East and Africa, this region has also performed very well with a growth of 37%. Asia and the Pacific Unlike the other two regions, Asia and the Pacific has faced an 18% decrease. This decrease may be due to various factors such as regional economic conditions, trade policies and other internal factors.
Valuations of strategic deals have increased slightly, and our conversations with executives indicate that there is a willingness to pay for strong businesses based on strategic priorities, but there remains serious uncertainty. Sellers also seem to be in no rush to sell, which can be seen in the uncertain initial public offering (IPO) market and long periods of private equity (PE).
Also, public market valuations are still significantly higher than transaction valuations. So far, the slight increase in deal valuations has not been enough to solve the deal bottleneck we noted in the Global M&A Report 2024.
Mergers and acquisitions large and small
Large mergers accounted for about 25% of deal value in the first five months of 2024. ExxonMobil’s $60 billion bid to buy Pioneer last October was the first move in a wave of deals that will continue through 2024. The move was followed by Chevron’s $53 billion purchase of Hess, announced the same month. Then, in early 2024, came relatively smaller moves: Diamondback Energy’s $26 billion bid to buy Endeavor, ConcoPhillips’ $23 billion buyout of Marathon Oil, and Chesapeake Energy’s $12 billion buyout of Southwestern. The fact that 90% of energy sector deals this year were mainly in traditional oil and gas shows that companies and consumers will continue to depend on oil and gas for years to come, and this requires strengthening the core positions of energy companies.
Mergers and acquisitions in the technology sector are slowly and piecemeal making a comeback. The value of transactions in this sector has almost doubled compared to last year, which is an important factor in the overall growth of the market, but the volume of transactions is still lower.
The offered and requested prices of buyers and sellers still have significant differences. Because both sides are looking at the record-breaking valuations of the past few years. In addition, transactions have become more difficult due to high investment costs.
The technology sector’s focus on generative artificial intelligence is beginning to show in merger and acquisition activity. Productive AI companies received at least 110 early-stage investments worth $7.5 billion in the first quarter of 2024 alone, with startups seeking funding to develop their basic models. In the same quarter, 11 outright acquisition deals were reported, a number likely to rise in the remaining months of 2024 as market demand for generative AI continues to expand.
Generative artificial intelligence in technology is just one of the forces that will play a role in the coming months, as more companies across all industries look to use this technology to gain a competitive advantage. Other factors include interest rates and the fallout from global elections, particularly in the United States.
Regardless of how these issues play out in the remainder of 2024, one thing is certain. Dealers are adapting their M&A processes (from screening to due diligence and integration) to the changing environment. This ability can be seen in setting goals for revenue growth and cost savings.
No Comment! Be the first one.