Reflecting the increased capital currently available to the investment market, M&A activity remained comparatively strong in the second quarter of 2024 after picking up momentum early in the year.
A total of 166 deals valued at more than $100 million were completed globally during the quarter, according to advisory firm Willis Towers Watson (WTW). That was the same number as in this year’s first quarter, and 28% more than the 130 deals closed in the second quarter of 2023.
The 35 “large” deals in the second quarter — those valued at more than $1 billion — represented a slight uptick for the third quarter in a row. There were also four “mega” deals valued at more than $10 billion, making a total of nine for the first half of 2024, compared with just three during last year’s first six months.
“If the first half of 2024 is any indication, dealmaking may be on the verge of returning to pre-Covid levels and deal behavior,” said David Dean, managing director of mergers and acquisitions for WTW.
Dean said the combination of rising market confidence, anticipated interest rate cuts, improved financing conditions, low volatility, and narrowing valuation gaps “will help shake off the dealmaking doldrums we’ve seen since late 2022.”
“Dealmaking may be on the verge of returning to pre-Covid levels and deal behavior.”
David Dean
Managing Director, Willis Towers Watson
Market doldrums aren’t only about the number of deals being made, though. There’s also the matter of how deals perform, in terms of how acquiring companies’ post-deal share performance compares with the market average.
Simply put, deal performance continues to sputter.
As CFO.com reported in January, in 2023, for the sixth time in seven years, the stocks of companies that completed M&A deals worth at least $100 million performed worse than the stocks of non-acquirers.
That actually disguises a longer-term trend, in which acquirers have outperformed the market by 1.4 percentage points over the past 15 years, according to WTW.
Still, despite the increased number of deals this year, those completed in the second quarter trailed the broad equity market by 9.3 percentage points, following a 13.1-percentage-point deficit in the first quarter.
The market performance numbers, which use data from LSEG (formerly Refinitiv), reflect the average change in acquirers’ share price from six months before deal announcement dates to the end of the quarter in which the announcements were made.
In North America, acquirers underperformed their regional index for the sixth consecutive quarter, by 7.7%.
Notably, the number of deals closed in China was nearly nil in the second quarter, with just three transactions, the same number as in the first quarter.
There are still substantial risks for M&A transactions, including lingering inflation, still-high interest rates, and uncertainty surrounding the upcoming U.S. presidential election.
“If an M&A rebound is to take shape,” said Dean, “we believe dealmakers will need to lower their risk exposure by exercising a high degree of caution, focusing on ‘best-fit’ deals, and [doing] thorough due diligence that allows for extended timelines.”
