The global merger and acquisition (M&A) market has reawakened during the first half of 2024, with new deals jumping by 22% compared to the previous year. The total value of these deals and assets changing hands is $1.5 trillion. This ongoing M&A revival is primarily driven by a surge in large deals worth over $10 billion. These mega-deals increased by 70% year-on-year. However, the overall number of deals declined by 25% to a four-year low, with smaller acquisitions worth $500 million or less falling by 13% in value.
With fewer deals but larger in size, investors can only speculate which company will become the next target. But the “picks-and-shovels” investment philosophy, investing in an essential instrument of an industry, indicates that the solution to this question lies within the dealmakers.
U.S. Leads the M&A Recovery
The U.S. emerged as a key driver of the M&A recovery, with the value of deals within the states rising by 43% to $796 billion. These deals account for more than half of the entire world. Moreover, it represents the country’s largest share of the global M&A market since 2019. European dealmaking also experienced a significant increase, rising by 43% in value, while the Asia-Pacific region saw a decline of 21%.
The Sectors Driving the M&A Activity
The energy sector witnessed a sizeable uptick in M&A activity, with deals increasing by 27% to $254 billion, making it the second-best performing sector behind technology. Noteworthy transactions in this sector include ConocoPhillips’ (NYSE:COP) $22.5 billion acquisition of Marathon Oil (NYSE:MRO), and the Abu Dhabi National Oil Company’s (UH:ADNOCDIS) proposed €14.4 billion takeover of German chemicals group Covestro (DE:1COV).
The financial services sector also experienced a 60% increase in deal volumes compared to last year, driven by Capital One’s (NYSE:COF) $35.3 billion acquisition of rival Discover Financial in February. This sector’s resilience and growth potential have attracted significant attention from dealmakers.
In addition, private equity-backed M&A activity saw a 40% increase in the first half of the year as buyout investors sought to capitalize on a record number of assets that needed to be sold to generate returns for their backers. This trend is expected to continue as private equity firms look to deploy their dry powder and unlock value in their portfolios.
Who Are the Major M&A Dealmakers?
With the overall decline in the number of deals, despite the bigger deals, investors may want to concentrate on who the dealmakers are.
Large banks such as Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), and Morgan Stanley (NYSE:MS) increased their share of the M&A advisory fee market to about 35% of the global total, although boutique banks led by New York’s Centerview Partners maintained a slight edge. Goldman Sachs emerged as the top financial adviser on mergers in the first half of the year, leading in both the U.S. and Europe.
M&A Activity Poised for Further Growth
Despite the recovery, M&A activity remains below pre-pandemic levels, and the market is still navigating through a complex macroeconomic environment. However, the resurgence in dealmaking activity in the first half of 2024 signals a positive shift. It suggests that the M&A market may be ramped up as large companies check their wish list to help further growth in the coming quarters.
Key Takeaway
Dealmakers are poised to prosper in the current M&A landscape, driven by a significant rise in mega-deals despite an overall decline in the number of transactions. With the number of smaller deals plummeting, speculating on potential targets has become an even chancier game than before. Instead, investors may find better opportunities in a different approach, focusing on the key dealmakers who facilitate these large transactions.
