Article · May 2, 2024

M&A trends: a revival wind sweeping the market

Mergers and acquisitions as a barometer of economic confidence

Global M&A fell 9.7% in 2020 to $2.2 trillion. With rate cuts in prospect and financing conditions stabilising, the conditions look right for a revival.

Mergers and acquisitions are a key engine of economic transformation and can be seen as a barometer of financial health worldwide. Their frequency and scale also reveal how much confidence companies and investors place in the economic environment. They mirror economic dynamics, innovation trends and corporate strategies in the face of global challenges and opportunities.

Historically, periods of crisis have often seen M&A activity fall, followed by recoveries marked by strategic consolidation across sectors. After bottoming out at $1,200 billion in 2009, global M&A volume has regularly exceeded $2,000 billion a year since 2014, despite annual variations.

The pattern repeated with the Covid-19 pandemic, which slowed economic activity generally, heightened uncertainty and complicated company valuations - both crucial to M&A decisions. In 2020, global mergers and acquisitions fell 9.7% to $2,200 billion, against $2,400 billion in 2019.

Hospitality, a telling illustration

The hospitality industry illustrates the influence of the economic environment particularly well. The impact of the pandemic showed up in a dramatic fall in revenue, down 46% in 2020 to $198.6 billion. That contraction directly affected the M&A market, making assets markedly less attractive because of their sharp depreciation. Major hotel chains suffered heavy financial losses, with companies such as Wyndham Worldwide and Marriott International seeing revenues fall by 36% and 75% respectively.

2024: a second wind?

With rate cuts forecast in the United States and a stabilised financing environment, conditions look favourable for an M&A revival - seen as essential to economic transformation worldwide. Three levers stand out.

• Inflation and interest rates: improving financial conditions, driven by slowing inflation and anticipated rate cuts, play a key role in the recovery of M&A activity;
• Catch-up on deals: a catch-up effect on transactions not completed during the Covid years, or any period of economic instability, should also help revitalise the market;
• Strategic adaptation: companies facing the need to transform their business models see M&A as an essential strategic tool for complementarity or diversification.

CEOs and private equity funds are looking for ways to generate value quickly. Emerging technologies, decarbonisation strategies - M&A is seen as the fastest and most effective way to adapt and transform in the face of market change. It continues to shape the future of industries globally, with tourism and mobility firmly in view for new strategic and innovative opportunities.

An article by IMPACT CONSULTANTS - Alexandre Veau and Flavie Picart.