We have reached the halfway mark of 2024, which yields an opportunity to take stock of the economic landscape and the mergers and acquisitions (M&A) activity that has shaped the first half of the year. This midyear review highlights the positive momentum in the global economy, the resurgence of M&A deals, and the key trends driving these changes, with a particular focus on the thriving technology sector in the United States.
The US economy is coasting on positive momentum, enjoying the ongoing boost from a strong labor market and improved productivity growth. The first half of 2024 delivered the global economic recovery forecasted by economists, energizing one-quarter of the world’s 45 largest economies that slid into recession in 2023 and elevating the world stock market (measured by the MSCI World Index) by nearly 10%. Global disinflation has made significant headway, and generally without job losses.
US labor data is unambiguously positive. For the first time since the late 1960s, the unemployment rate has been below 4% for over two years. Initial jobless claims hover just above 200,000, a historically low level. Hiring continues to be broad-based with robust job creation, adding 829,000 jobs in Q1 2024.
The M&A space has seen its fair share of ups and downs over the past couple of years, with challenging macroeconomic factors—from post-pandemic conditions to burgeoning interest rates and fluctuating inflation—forcing deal activity to record lows. As the world steadily resumed normal activities post-pandemic in 2021, M&A transactions boomed and investor confidence rose. This moment of M&A prosperity was short-lived, however, ushering in another steep drop-off in mid-2022. As high inflation, rising interest rates, and geopolitical uncertainty hindered dealmaking, lower share prices left investors struggling to secure deals.
The stabilization of inflation and interest rates, coupled with the availability of ample capital awaiting deployment, has reignited confidence among dealmakers. Moreover, technology companies are recognizing the operational imperatives of portfolio restructuring to achieve digital agility and resilience, further fueling M&A activity. Tech companies are actively seeking to enhance operational efficiencies, expand market share, and acquire AI and machine learning expertise while broadening their digital transformation efforts. To achieve these goals, they are pursuing promising private companies and PE portfolio assets that can fuel their inorganic growth journey.
Beyond technology as a crucial driver of M&A activity, several other sectors are also experiencing significant momentum. Here’s a closer look at some vital industries contributing to the bustling M&A conditions.
The energy and utilities sector is experiencing significant growth due to the global push for sustainability and decarbonization. Investments are mounting in renewable energy sources like solar and wind, with companies acquiring technologies and firms to enhance their green portfolio. Notable deals include acquisitions of clean energy startups and mergers between large energy companies that focus on renewables.
The financial services sector is evolving alongside the upswing in financial technology and digital banking solutions. Fintech innovation, regulatory changes, and digital transformation are key drivers of M&A. Major deals include acquisitions of fintech startups by traditional banks and investments in digital payment solutions.
The TM&BS sector is undergoing transformation due to technological advancements and the increasing demand for digital services. M&A activity is propelled by the need for consolidation and the expansion of digital capabilities. Essential deals include telecom company mergers, media firm acquisitions, and investments in business services that enhance digital offerings.
The healthcare sector continues to see robust M&A activity driven by consolidation, technological advancements, and personalized medicine. Digital health and telemedicine are particularly hot areas as healthcare companies acquire specialized firms to enhance their capabilities. Significant deals include major mergers of healthcare providers and acquisitions of biotech startups.
Moving into the second half of 2024, we remain cautiously optimistic about the global economic outlook and M&A activity across multiple sectors. Of course, continued vigilance in monitoring economic indicators and adapting to emerging trends will be crucial for stakeholders. By executing strategic planning and enacting proactive measures, companies can navigate the complexities of the current environment and capitalize on the opportunities ahead.
Let our team of experienced professionals guide you through every step of the M&A process. With our deep industry knowledge and proven track record, we can help you achieve a successful outcome. Contact us today for a consultation to discuss your M&A needs.