Global M&A is (Finally) Heating Up

For the past two years, uncertainty has been the prevailing theme for mergers and acquisitions (M&A) dealmakers. Through the first half of 2024, higher-for-longer interest rate environments continued to suppress deal volume across the globe. Today, ongoing conflicts in Ukraine and the Middle East, trade tension between the U.S. and China, and the upcoming U.S. election are still weighing on markets.

While geopolitical headwinds, valuation gaps and regulatory scrutiny remain obstacles, dealmaker sentiments received a boost in September when the Federal Reserve announced a much-awaited interest rate cut — its first in four years. Coupled with policy easing that was already underway in other regions, the Fed’s 50-basis-point slash could signal more favorable dealmaking conditions in the coming months.

Global M&A deal volume is trending upward

According to early-stage deal data from the SS&C Intralinks Deal Flow Predictor for Q4 2024, deal activity was already poised to rebound in anticipation of the Fed’s announcement.

The quarterly report, which leverages proprietary early-stage deal data to form a highly accurate M&A forecast, shows strong upside for deal volume across the globe. In a significant shift from recent editions of the report, none of the four regions we track are expected to fall into the underperform range. This projected global uplift in deal volume could signal a departure from previous down quarters in which smaller numbers of big-ticket consolidation deals drove global deal value. 

The extent to which the Fed’s most recent rate cut, which is already priced into many deals, will unlock pent-up demand remains unclear. As we wait for the effects of policy shifts to take effect, dealmakers expect a resilient U.S. economy to continue driving global deal value.

The Federal Reserve is chasing a moving target

For now, U.S. monetary policymakers may be on the verge of sticking a rare soft landing, successfully curbing decades-high inflation without incurring significant economic pain. Less than a month ago, the labor market was telling a different story, leading many to project further rate slashes of up to another 100 basis points by the end of the year. With encouraging numbers from the latest jobs report, the Fed may take its time getting back to baseline rates through a series of incremental 25-point cuts. 

Mixed signals in major economies

Meanwhile, China has been embarking on rate cuts of its own — as well as fiscal stimulus announced in October to revive the economy — amid mounting concern around a moribund stock market and discouraging jobs and inflation data. Opinions are split as to whether the People’s Bank of China’s decision to cut rates was the right one, as regulators are walking a fine line between fighting inflation and suppressing economic growth. However, despite China’s unraveling market conditions and trade relations with the U.S., APAC dealmaking activity grew from Q1 to Q2 2024 and held steady year-over-year, a trend we expect to continue behind cross-border activity and improving lending conditions.

Major economies in Western Europe, though much closer to recovery, are also showing a brightening dealmaking picture against cautious economic sentiments. In Germany, a widening gap between the struggling manufacturing sector and services, which has remained relatively stable, is driving recession fears. However, with lower debt costs on the horizon, dealmakers across the Eurozone are warming up again, particularly in the energy sector as the push for decarbonization continues.

Now is the time to source deals

With global deal activity expected to increase, dealmakers are preparing for changing market conditions and competitive dynamics. Acquirers proactively sourcing deals can unlock additional upside by tapping into opportunities before the market froths and demand for the most desirable targets becomes inflated.

Many are renewing their focus on strategic, capability-based acquisitions rather than participating in competitive auctions. Building a strong value-creation story helps firms acquire with conviction and maintain investor buy-in throughout the transaction, which is crucial when valuations and interest rates are squeezing returns.

What’s next?

As macro conditions in many major economies continue to improve, the stage is set for increased M&A activity across all regions. IPO diligence is also on the rise, signaling issuers’ readiness to explore public markets and improving investor sentiments. How far into positive territory is dealmaking activity trending as we head into Q4 2024? Which geographies and industries are showing the most upside in the coming months?

Download the SS&C Intralinks Deal Flow Predictor for Q4 2024 for a full M&A forecast by region, sector and deal type.