Merger and acquisition (M&A) opportunities have slumped as of late. Many large deals are facing regulatory challenges. And expectations are high, whether the deal is an avenue for growth, a way to settle debt, or acquiring a competitor or service provider.
In new research from Deloitte’s 2024 M&A trends survey, 1,500 M&A leaders identified the plans and trends around M&A strategy this year. Despite recent struggles, respondents say the M&A market is ready for a turnaround in 2024, offering a "new era of opportunity." The buy-in on this new era is evident, according to the data, as 83% of survey respondents said they expect their own organization’s deal volume to increase in 2024 “somewhat” or “significantly” — up 14 percentage points over the past two years. Larger deals are anticipated as well, with 82% expecting the size of the deals to increase in the coming year.
While the economy’s past performance and future forecast has impacted the M&A market as a whole, those in the corporate market noted several metrics they use to evaluate an M&A deals, including operating model health and workforce satisfaction and engagement, which represented 36% of the responses.
Many companies are reassessing how they function by going through restructuring. Not only can this promote efficiency and productivity, but it can make a company much easier to sell if they are freshly restructured and maximally efficient. According to data, 68% of all respondents said their companies have gone through some type of restructuring since the 2020 pandemic.
Closing the Deal
When it comes to completing the transaction, barring any regulatory pushback, many elements come into play. According to surveyors, this includes strategy, due diligence, planning, and integration are all major components of whether or not a deal is perceived as successful.
Slightly less than half (44%) of respondents said their M&A strategy was an important element to making a deal happen. Deal valuation was a close second at 41%, followed by financial due diligence at 40%. Operational due diligence (38%) and board involvement and approval (36%) were also top choices.
The idea of planning and preparing for as many possible outcomes during an M&A transaction is not new to CFOs. During discussions on this topic at CFO events last year, finance leaders expressed interest in what areas of an M&A transaction can be proactively approached and prepared for.
Access to Capital Challenges
As capital costs have risen in recent years, acquiring the necessary capital to put deals together has been difficult for many organizations. Many have had to explore a variety of avenues to access the necessary capital to move deals forward. These means have consisted of exploring nontraditional or nonbank financing options, equity, or alternative structures to the deal altogether.
Over half (51%) of respondents said they have explored nonbank and nontraditional lending verticals as a way to source cash for a deal. Some have restricted their deals completely, as 46% said they have set up alternative structures like joint ventures and strategic partnerships. Nearly four in 10 (38%) have constructed near cashless deals, using all equity as a way to provide value.