
Global Developments
After two years of declining M&A activity, both in deal value and deal count, corporate dealmaking recovered in the first half of 2024. Especially Q1 2024 was very strong compared to Q1 2023. A further reduction of interest rates helped boost M&A activity further in the second half of 2024.
North America
North American M&A activity showed a strong increase of over 9% in deal value in the first half of 2024, mainly due to high growth of large deals in 2024. Interest rate reductions acted as an accelerator for deal activity. However, the presidential election in the end of 2024 caused more political uncertainty and had an adverse effect on inflation compared to the macro economic objectives (2% inflation). Uncertainty regarding the North American economic situation also has its implications for other major economic zones, as we have seen in Japan last August.
Europe
European deal value increased in the second quarter (QoQ) and the number of deals increased by more than 12% in the first half of 2024 (YoY). M&A activity did increase, partly driven by the interest rate decreases of the ECB and other central banks in Europe. Especially PE is benefitted from these reductions and is more competitive in their bidding relative to strategic buyers. Other factors such the political developments in amongst others the UK and France, caused some uncertainty in financial markets which had the potential to impact pricing of targets. It is expected that markets are accustomed to the conflict in Ukraine thus if the situation remains unchanged, it is not expected to have much influence.
Middle East
The MENA region has been experiencing dynamic M&A activity driven by technological advancements, economic diversification, and sustainability goals. The region witnessed a 4% growth in M&A in the year 2023 and a drop in number of deals in 2024. However, a surge in value of deals was expected for 2024.
MENA countries are focusing on diversifying their economies away from oil dependency. Renewable Energy and Sustainability and Technology and Digital Transformation are the two sectors that are driving M&A. However, regional conflicts have had a clear impact on the region.
Asia and Far East
Companies from the APAC region are actively pursuing acquisitions in Europe and the Americas to diversify and gain access to new technologies and markets. Conversely, international companies are also targeting APAC for its growth potential and emerging market opportunities. However, US – China relations and the uncertainty of the real estate market are having a clear impact. Deal volumes decreased 17% and deal values dropped 32% in the first half year of 2024 compared to 2023. The decline was most pronounced in Japan and China. India’s deal volume dropped 17% but deal values increased with 18%, indicating strong investor interest.
Southeast Asia has seen a potential rebound in M&A activity due to reduced interest rates and a recovering IPO market. Key sectors like technology, renewable energy, and healthcare are likely to drive this growth. Private equity firms, with significant capital reserves, could enhance investments in these areas. Additionally, government reforms are creating a more supportive environment for M&A, suggesting a positive outlook despite economic challenges.
Overall, there are signs of optimism, especially in sectors aligned with technological advancements and sustainability goals.
Role of Corporate Finance Specialists
Corporate advisory specialists play a crucial role in guiding companies through complex financial, strategic, and operational decisions. Their importance can be highlighted across various areas, including mergers and acquisitions, strategic planning, financial restructuring, and more.
Some of the key values that corporate advisory specialists bring to the table, is their deep industry knowledge and experience. Their understanding of market dynamics, financial principles, and operational best practices adds significant value to their clients. They also provide an objective and independent perspective, which is crucial for making unbiased decisions and avoiding conflicts of interest that may arise from internal stakeholders.
Assistance in forecasting, risk assessment, financial modelling and scenario approach
In an increasingly complex economic and political landscape, the deep understanding of financial markets and macro economic environments of corporate finance specialists is essential in almost every stage of a company’s lifespan.
Corporate finance specialists bring insights by analyzing the financial performance of an organization and its value drivers in combination with assessing market trends and expectations. This enables management to form expectations based on internal and external variables and creates the building blocks for a solid financial forecast which can be incorporated into a financial model as a basis for strategic (M&A) decisions.
These financial models can be built around multiple scenarios to provide a better understanding of the impact of changes in a company’s environment. By incorporating possible changes in internal and external factors (think for example about changes in interest rates, raw material prices or shipping expenses), corporate finance specialists can provide organizations with more insight into the risks and opportunities and help informed decision making.
The provided insight into possible outcomes helps management to design strategies to anticipate and adapt in worse-case scenarios. For example by postponing investment decisions.
In conclusion, corporate finance advisory makes organisations exploit their strengths and mitigate their weaknesses. This gives them the opportunity to act quickly in fast-changing environments and ensures that companies are prepared for the future.
Authors:
Eyad Farsakh, Kreston Awni Farsakh & Co, Dubai
Ward Rentenaar, Kreston Lentink Corporate Finance, Netherlands