A real limbo. That’s what experts predict will be in store for the mergers and acquisitions (M&A in slang) market next year. The sector heads towards 2024 with low expectations after about twelve months that have been “disastrous” for this activity. The starting point is so pessimistic that they even estimate that the combined value of global operations will fall below three trillion dollars for the first time in a decade. The symptoms of economic slowdown, especially in Europe, and the doubts of private capital holders are some of the factors that will work against them at a time of maximum uncertainty for the markets about whether there will finally be a soft landing of activity or Finally the market will suffer the effects of a strong contraction.

Precisely, the co-director of Mergers and Acquisitions in North America at JPMorgan, Jay Hofmann, warned that until this mystery is resolved the sector will remain reluctant to make a move. “I think that when we finish the first quarter we will have the answer to whether it is a soft landing or some type of recession. That clarity will at least allow people to make decisions and get them out of limbo,” he specifies, while ruling out a moment takeoff due to the political debate. It must be taken into account that more than 40% of the world’s population has an appointment with the polls in a historic exercise in terms of holding elections, which may cause some ‘geopolitical shock’.

 

“M&A activities will be negatively impacted during the first half of 2024 as corporate earnings are likely to deteriorate amid an overall recessionary environment,” says global co-head of technology and communications investment banking. Citigroup large cap Wilhelm Schulz. Now that inflation has peaked and the cycle of interest rate increases has come to an end, players are beginning to adapt to a more expensive financing situation for longer and to get rid of some assets. With this starting point, the forecasts anticipate a few first months of reduced movements, similar to the second half of 2023, to begin to move from July 2024, when a rebound could occur.

Spain has recorded the worst year of the 21st century in mergers and acquisitions

This vision is not shared by Barclays, a firm from which they defend that the pent-up demand will result in “large-scale” transactions, especially in the corporate sphere. The global co-director of M&A of this British house, Gary Posternack, admits that “the volume of conversations with companies regarding strategic agreements has been increasing in recent months”, without ruling out the possibility of reaching several public agreements of significant size in the s next months. One of the difficulties they detect is that the spreads remain at high levels, with gaps between buyers and sellers that have led to the acquisition price beginning to depend on the future performance of specific assets.

 

“We are seeing the convergence of price expectations with several sellers optimistic about where valuations should be. Given the time we have spent at current valuation levels, we have reached an area where we are seeing greater stabilization,” Bank notes. from America. For now, there is hope in sectors such as energy after the COP28 in Dubai in the heat of decarbonization, as well as in the area of ​​biopharmaceuticals, as long as new war threats do not emerge. Another area in which dynamism is expected is in ‘s-ports’ in which there is “a lot of appetite” after the pandemic as a result of the interest it has aroused in the Middle East, as well as in electric mobility after a year which has been active for electric cars, without forgetting everything related to artificial intelligence.

By region, Asia would be the most dynamic, where far-reaching agreements are expected, as well as in Japan. In Europe, it is the technology that can move the sector. “After a long period of smaller and minority agreements, major mergers and acquisitions in the technology sector in Europe are returning, as evidenced by some purchase agreements that have been carried out,” says the general director of technology to Para the EMEA area of ​​UBS AM. In any case, the outlook becomes weak while interest rates will continue to be the object of investors’ attention while financing costs are already damaging balances, with a special impact on capital-intensive factors.

 

According to data collected by Spanish Stock Exchanges and Markets (BME), the total value of M&A operations globally between January and September was two trillion dollars, 27% less compared to the same period last year, marking lowest since 2013. At the European level the fall was even more pronounced in global comparison if one takes into account that in the first half alone it sank by 55%, exceeding the 45% reduction on the world average. In this sense, Spain was one of the worst unemployed if one takes into account that it has been the worst year of the entire 21st century in terms of mergers and acquisitions. With a national market practically shivering, 1,751 operations were recorded until September, with an aggregate import of 48,016 million euros, according to the TTR Data report, 29% less than that mobilized between January and June 2022 when the ECB had not yet launched the fastest interest rate cycle in its history.

Source: ePrimefeed