Dealmakers Hope for ‘M&A Rebound’ After Weak 2023

It was a bleak year for mergers and acquisitions (M&A), the worst in a decade.

However, a pair of reports Tuesday (Dec. 26) show that dealmakers expect the M&A climate to warm as economic conditions improve.

As Reuters noted, total M&A volumes dropped 18% this year to about $3 trillion, the lowest since 2013, when deal volumes came to $2.8 trillion.

According to that report, dealmakers said high interest rates made it tougher for private equity firms and companies with low credit ratings to raise funds for acquisitions. And even when financing was available for deals, an uncertain economic landscape made it difficult for sellers and buyers to agree on a price.

“We were surprised by how difficult it was to bring deals forward in 2023. I think there will be an M&A rebound, but how much of it actually appears in 2024 and how much of it is a setup to 2025 remains to be seen,” Paul J. Taubman, founder and CEO of investment bank PJT Partners, told Reuters.

Meanwhile, a report Tuesday by Seeking Alpha also found some renewed optimism among dealmakers following a difficult year.

“Clients are more actively calling, and people are picking up pencils on processes that are ready to kick off,” Michele Cousins, head of leveraged capital markets for the Americas at UBS, said at a recent press briefing. “With the recent strength in markets and reduced volatility, people are feeling more comfortable.”

That report points out that the end of this year was marked by several major deals: Bristol Myers Squibb’s planned $14 billion purchase of Karuna Therapeutics, and Nippon Steel’s agreement to purchase US Steel, another $14 billion deal.

Meanwhile, Ginger Chambless, head of research at J.P. Morgan Chase Commercial Banking, told PYMNTS last week that businesses are “cautiously optimistic” about 2024.

While 2023 saw a better-than-expected economic performance, Chambless said companies are “operating at the more conservative end of the spectrum” when it comes to investments and capital expenditures planned for the year ahead.

“There’s some leeway here, as financial managers have not overleveraged their balance sheets, which means they also can weather a slowdown if it materializes amid a higher-for-longer interest rate environment,” the report said. “Quantitative tightening by the central bank will take some liquidity out of the economy.”