Global M&A picks up after flurry of deals

Companies have braved a tough antitrust environment to pursue large deals, increasingly backing themselves to win in court against regulatory challenges

Mergers and acquisitions (M&A) bounced back in the first quarter after a downbeat last year, thanks to the return of mega deals, cheering investment bankers and lawyers waiting for a pickup.

Total M&A volumes globally climbed 30 percent year-on-year to about US$755.1 billion, according to the most recent data from Dealogic.

The number of transactions worth more than US$10 billion jumped to 14, compared with five during the same period last year.

Investment bankers said boardroom confidence for dealmaking has improved on the back of strong earnings, potential interest rate cuts this year and an ebullient market.

“When you see larger deals happening, it’s a much more direct sign of the returning health of the market, because boards and CEOs, due to the nature of large deals, are going to be more conservative when they approach them,” Centerview Partners LLC cofounder Blair Effron said. “We do think that the activity that we see today is heading in the right direction.”

US M&A volumes surged 59 percent year-on-year to US$431.8 billion. European deals jumped 64 percent, while Asia-Pacific volumes slumped 40 percent.

Dealmakers said a potential market recovery, following the successful debuts of Astera Labs Inc and Reddit Inc, could provide a boost to the pipeline.

“The fact that we’ve got two data points in the IPO market ... gives the CEOs, boards and financial sponsors that we’re talking to a sense that there might be multiple paths to achieve their objectives rather than one,” Citigroup Inc investment banking head Tyler Dickson said.

Leveraged buyout volumes, which slumped last year due to a spike in financing costs, declined 7 percent to US$91 billion.

“We’re still waiting for the private equity work to really pick up — that’s still the missing ingredient,” said Krishna Veeraraghavan, global cohead of the M&A group at law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP. “You still are seeing a mismatch between what sellers expect their assets to transact for and what buyers are willing to pay based on where rates are right now.”

Meanwhile, structured deals — which include spin-offs, separation and carve-out transactions — also drove M&A volumes. During the quarter, 13 corporate separation transactions with an expected value of more than US$1 billion were announced globally, compared with eight during the same period last year, Goldman Sachs Group Inc global head of M&A structuring David Dubner said.

“2024 is on path to be one of the highest years in terms of corporate separation activity, and the dialogue we’re having is supportive of that theme as we look forward,” Dubner said.

Companies have braved a tough antitrust environment to pursue large deals, increasingly backing themselves to win in court against regulatory challenges, with some companies having to wait 18 months or longer for transactions to close.

“Tech is the sector that’s the most scrutinized by regulators, and yet tech seems to be materially back and is right at the forefront of deal activity. So that just tells you that the current regulatory issues certainly aren’t going to be a headwind to broader M&A activity,” Truist Securities Inc head of M&A Raul Gutierrez said.

Bankers also expect a pickup in cross-border deals, as cashflush buyers hunt for transformative acquisitions. Cross-border volumes rose 17 percent year-onyear to US$171.7 billion during the quarter.

“Corporates remain cautious on the growth prospects for China and Asia more broadly, and there is a lot of thinking around hedging against that. We will potentially see more deals from Europe into the US, some of which will be defensive,” Morgan Stanley Europe, the Middle East and Africa M&A head Jan Weber said.