The global M&A market’s big-deal bravado is losing steam as

Mergers and acquisitions (M&A) are about confidence. And confidence in Q1 in the U.S. was partly driven by expectations of up to six interest rate cuts, but the Fed has held its rate target at 23-year record highs, and expectations have come down to potentially two or even zero rate cuts by yearend. This has resulted in a slight pullback after an initial leap into dealmaking in 2024.

Global M&A activity is up 17% year on year, according to Mergermarket data. The first part of the year roared to a start with a series of larger-cap listed deals as strategic investors put their share capital to work in a bid to boost languishing share prices as they search for growth.

Nine of the targets for the top 10 largest deals in the first half of 2024 have been headquartered in the U.S.—and four comprised a stock swap.

As interest rate expectations settled into a more modest range, so too did large-cap deal flow. Just two of the top 10 deals were announced in Q2, ConocoPhillips’ $23.1bn all-stock acquisition of Texas-based upstream energy company Marathon Oil in May and Silverlake’s $14.9bn bid for media group Endeavour Group.

Together, these deals underscore the resurgence in deals in the large-cap space with more than 20 deals in the multibillion-dollar range, including 14 in the U.S. 

The dominance of North American M&A in the market—making up 57% of global activity—is underlined by its relative stability at a time of macro tensions and geopolitical turmoil impacting confidence in other regions.

Domestic U.S. corporate buyers were driven, ahead of the election, to assess their paths to create value in a higher rate environment, be it through executing spin-offs like the largest deal of the year so far of GE Vernova or seeking scale through M&A like Capital One’s $35bn acquisition of Discover Financial aimed at competing with its largest rivals.

The largest sector for M&A globally was technology, with deal volume up 37% year on year, of which North America made up some 66% of the total. The dual drivers of the quest for digitization and the search for how companies can apply artificial intelligence (AI) to their industries have driven a race to pick up assets and talent.

The two largest deals in Q2 point to two significant U.S. trends: Oil and gas companies seeking to deploy capital they have amassed during this period of high commodity prices and a rekindling of private equity buyouts.

In oil and gas, the impact of geopolitical pressure on supply, the opportunity to benefit from scale, and the promise of increasing returns from global energy demand has triggered a rush for assets, particularly in the Permian basin, kicked off late last year by Exxon Mobil when it formally announced its USD 59.5bn acquisition of Pioneer Natural Resources.

The quarter has shown confidence emerging in the new rate environment for private equity, with buyout activity up 37% year on year. The $14bn bid for Endeavour Group from Silver Lake, Mubadala, and DFO Management highlights this trend as the top leveraged buyout for the period.

Private equity is gaining confidence in the new dealmaking environment, it has record dry powder, and is under pressure to deploy capital. With some talk of how 2024 buys will produce strong returns for sponsors, a fear of missing out is developing. This is leading to a further two-tier market for PE activity. High-quality private assets are greeted by a robust market, but there is a tendency for lower-quality auctions to fall apart because although sponsors are keen to put capital to work, with debt remaining expensive, they are proceeding with caution.

In EMEA, the largest deal in the region was BBVA’s hostile bid for Sabadell, the first sign of appetite for large banking deals there since the 2008 financial crisis. The U.K. was particularly active in terms of the number of deals, boosted by activity in the large-cap listed space with transactions emerging for high-quality assets. The fear of missing out seemed apparent in some of the bid premia, including an eyewatering 104% premium following a bidding war for U.K. logistics company Wincanton. However, some of this year’s transactions fell apart at the first hurdle, as shareholders started to prize long-term value over short-term gains. The region has a healthy pipeline of activity to watch with Sanofi’s consumer health division spinoff being prepared in the background.

Asia Pacific saw a significant slowdown in M&A as China lost its top-two position for dealmaking for the first time since 2018. However, the region was not immune to the trend of listed takeovers, with an increasing number of listed companies considering going private in Hong Kong, including luggage designer Samsonite and broadband provider HKBN. India kept deals flowing in the region, with strong activity in telecoms M&A. And just as confidence in M&A grows and we see listed corporates boom back into favor for acquirers, there is an equal amount of handwringing around whether the current round of take-privates is the beginning of the end for global equities.

One thing is for sure, while valuations for quality assets in the private markets remain high, and assets are viewed as relatively cheap on the stock market, they will continue attracting buyers around the world.

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