M&A Trends and Strategies for 2024

As 2024 unfolds, the M&A market in the U.S. presents a landscape brimming with both challenges and opportunities. For investment bankers and CEOs of boutique firms, understanding the nuances of this market is essential for capitalizing on emerging trends and crafting successful strategies. This article delves into the key factors that we in Finalis perceive are shaping the M&A outlook in the U.S. and North America, and offering insights for effectively navigating this dynamic arena in the coming year.

Economic Outlook and Market Sentiments

The U.S. economy, a primary driver of North American M&A activity, is expected to display modest growth in 2024. However, this growth may be uneven across sectors, creating pockets of heightened M&A activity. Investment bankers should closely monitor economic indicators and sector-specific trends to identify potential hotspots for M&A transactions.

Market sentiments in 2024 are likely to be influenced by ongoing political and fiscal policies, as well as regulatory developments. Taxation and trade policies, in particular, will have significant implications for deal structuring and valuation. A thorough understanding of these aspects is crucial for advising clients on optimal deal timing and structure.

Technological Disruption and Innovation

Technology remains a key catalyst in the North American M&A scene. In 2024, we expect to see increased activity in sectors such as artificial intelligence, cybersecurity, and digital health. These rapidly evolving industries offer ripe opportunities for strategic acquisitions and partnerships.

Investment bankers need to keep abreast of technological advancements and their implications for various industries. This knowledge is vital for identifying undervalued assets and advising clients on technology-driven growth strategies.

Regulatory and Political Landscape

The regulatory environment in the U.S. is expected to remain complex in 2024. Antitrust scrutiny, particularly in technology and healthcare sectors, is likely to intensify. Additionally, evolving regulations around data privacy and environmental sustainability will play a significant role in deal considerations.

Navigating this regulatory maze requires investment bankers to be well-versed in compliance issues and proactive in their approach to regulatory challenges. Finalis’ expertise in this domain not only mitigates risks for bankers on its platform, but also positions them as valuable advisors in complex transactions with their clients.

Furthermore, Finalis CCO Brad Ziemba asserts a core Finalis value: “Finalis’ rock-solid compliance strategy works because it’s bound to a commitment to integrity. This is a cornerstone in guiding our clients through the complexities of 2024’s M&A environment, ensuring they capitalize on the right opportunities at the opportune moment—and are ethically aligned in doing so.”

Key Trends & Sector-Specific Dynamics

Certain sectors in North America are anticipated to be particularly active in M&A. For example, the healthcare sector, undergoing rapid transformation, presents opportunities for consolidation and diversification. Renewable energy and infrastructure are also likely to see increased M&A activity, driven by policy support and technological advancements.

Understanding the specific drivers and challenges in these sectors is essential for developing tailored M&A strategies that align with client objectives. The U.S. M&A market is poised for a transformative year in 2024, shaped by several key trends and dynamics. Here's an in-depth analysis, supported by recent industry insights:

• Shift Towards Smaller-Scale Deals: In 2024, the U.S. M&A market is expected to see a trend towards smaller-scale deals, driven by the high-interest-rate environment. These modest transactions present reduced financial risk and align with a cautious approach to risk management. Companies are also developing structural alternatives to upfront cash payments, using equity considerations and earnout structures.
  
  
• Private Equity’s Role: Private equity firms are expected to continue playing a significant role in the M&A landscape. Their substantial capital resources and operational expertise make them key players in steering M&A activities. The global markets experts at Foley.com concur: “The ascent of private equity firms in the M&A landscape has been a consistent and enduring trend. This trend is poised to continue well into 2024. With significant capital resources, private equity investors are expected to be pivotal in steering M&A activities. Their influence and presence in the market are likely to persist, shaping the landscape of mergers and acquisitions in the years to come.”
  
  
• Cross-Border M&A Dynamics: Cross-border M&A activities are expected to gain traction, driven by the reopening of international borders and companies seeking growth opportunities and diversification. This trend underscores the importance of understanding global regulations and cultural nuances.

• Regulatory and Political Environment: The regulatory landscape, especially in the U.S., presents potential barriers to M&A growth. Antitrust scrutiny remains a concern, and any changes in economic outlook or the end of the rate-hiking cycle could influence M&A activities.

• Technology Sector and AI Revolution: The technology sector is set to continue its M&A spree, with a focus on digital transformation. This includes acquiring AI-based businesses and leveraging AI to improve M&A processes. The burgeoning role of generative AI is making tech companies a prime target for M&A activities.
  
  
• Healthcare Sector Outlook: Despite recent declines in dealmaking, the healthcare sector is expected to experience a resurgence in M&A activities in 2024. Factors contributing to this include shrinking valuations making healthcare companies attractive acquisition targets, and the sector’s ongoing transition toward value-based care. Moreover, the growing focus on mental health and remote patient monitoring (RPM) technologies are likely to make digital health companies highly sought-after in M&A deals.

• Renewable Energy Outlook: The renewable energy sector, particularly solar, is poised for growth. Utility-scale solar capacity additions have outpaced other sources, and federal investments, along with the demand for decarbonization, are expected to further boost the renewable sector. However, wind energy faces challenges due to higher costs and permitting hurdles.

Unlocking Success in 2024 M&A

The M&A market in the U.S. and North America in 2024 is set against a backdrop of economic recovery, technological innovation, and regulatory complexity. Success in this environment demands a multifaceted approach—one combining economic insight, technological savvy, regulatory acumen, and sector-specific expertise. 

For the coming year, Finalis’ Head of Global Markets Donald Sung observes: “While the overall M&A volume in 2023 remained at roughly the same level as the previous year, moving forward through 2024, we see the recent large deal announcements in pharmaceuticals, healthcare, energy, as well as transportation (Alaska Air/Hawaiian Air) indicating the potential for a rebound once the U.S. Fed gives a definite signal for rate pause or cut.”

We believe that the key to successful M&A lies in agility and technological leverage. Finalis’ platform, which has revolutionized the traditional broker-dealer model, equips investment bankers with the tools and services they need to navigate these complex waters. Our platform provides an integrated environment for managing M&A activities, from initial outreach to due diligence and closing. This digital approach not only streamlines processes but also offers deeper insights into potential deals, a crucial advantage in a market where speed and information are paramount.

For investment bankers and boutique firm CEOs, the ability to adapt to and capitalize on the trends we’ve outlined in this article is key to achieving successful outcomes in M&A for 2024.