Panel, Conference Presentation
M&A: Moving On and Up | Milken Institute Global Conference 2024
Milken InstituteRomaine Bostick, Anu Aiyengar, Andrew Bednar, Ron Eliasek, Andrea Guerzoni, Alan Tannenbaum
- M&A activity is projected to show a gradual recovery in 2024, with expected volumes exceeding the $1.5 trillion mark, though remaining below the $5 trillion peak, driven by strategic motivations rather than purely financial ones.
- Large-scale deals are anticipated to grow, with take-private transactions forecast to increase approximately 25% year-over-year as valuation acceptance rises and credit availability shifts, while financing markets are expected to remain volatile with narrow decision windows.
- Strategic acquirers are predicted to lead the market recovery more significantly than private equity, utilizing all-stock structures to mitigate financing risks, whereas private equity volumes are expected to stay muted until interest rates stabilize.
- Cross-border activity is forecast to represent a small fraction of the total market, likely under 25%, with growth concentrated between allied nations such as the UK and US, while geopolitical tensions and regulatory uncertainty are expected to limit broader international deals.
- A significant backlog of transactions is expected to be cleared over a 24-month horizon, as regulatory scrutiny, particularly regarding antitrust and CFIUS reviews, extends closing timelines and increases litigation costs for large-scale deals.
- Corporate strategies are shifting toward aggressive capital deployment and exit diversification, including continuation funds and partial monetizations, as organic growth drivers diminish and limited partners become willing to accept IRRs in the 15% to 18% range.
- The market outlook incorporates substantial capital availability, with $5 trillion in non-bank balance sheets and $4 trillion in private capital, alongside a structural decline in listed companies that necessitates creative deal structures outside traditional IPO routes.
- Technology adoption, specifically AI capabilities, is expected to render traditional "build versus buy" analyses obsolete in most sectors, while infrastructure and energy transition deals are anticipated to remain high as companies power data centers and manage energy transitions.
- Regional dynamics suggest the Middle East will emerge as a key source of outbound capital with opportunities in markets like Japan, while U.S. buyers are positioned to benefit from dollar strength despite global turmoil.
- Long-term market conditions are expected to normalize between 2025 and 2026, featuring robust financing environments and adjusted leverage ratios as passive investing dislocations are mitigated and equity markets stabilize.