Corporate dealmaking is experiencing a remarkable resurgence in 2024, marking a significant departure from the subdued activity witnessed in the past two years. This week, notable transactions have underscored this revival, including Capital One’s acquisition of Discover for $35 billion, Truist Financial’s $15.5 billion sale of its insurance arm, and Walmart’s agreement to purchase TV maker Vizio for $2.3 billion. Collectively, these deals amount to a staggering $53 billion, contributing to a total global deal value of $425 billion announced this year — a remarkable 55% surge compared to the same period in 2023, according to Bloomberg estimates.
Revival After a Downturn
The resurgence in dealmaking comes on the heels of a significant downturn in global deal values over the past two years. Following a peak of over $5 trillion in 2021, deal values plummeted to under $3 trillion in 2023, accompanied by a 17% decline in deal volumes to 55,000 transactions, as reported by the London Stock Exchange Group. Megadeals, in particular, experienced a sharp decline, with transactions exceeding $5 billion dropping by 60% from nearly 150 deals in 2021 to fewer than 60 in 2023.
Factors Driving the Rebound
Several factors contribute to the current deal bonanza. A sunnier market and economic outlook, with stocks trading near-record highs, have provided companies with a robust currency for pursuing deals. Moreover, lofty valuations in the market incentivize selling, while buyers seek assets poised for future growth. The anticipation of lower borrowing costs, signaled by central banks suggesting a possible reduction in interest rates, has further fueled deal activity. Many companies, buoyed by strong cash flows and healthy balance sheets, are eager to capitalize on acquisition opportunities amid pent-up demand after years of subdued activity. Additionally, private equity firms are under pressure to capitalize on the increased value of their assets and deliver returns to investors.
Challenges Ahead
Despite the resurgence in dealmaking, challenges loom on the horizon for aspiring dealmakers. Persistent inflation, the risk of a surprise recession, escalating armed conflicts, regulatory crackdowns, and uncertainty surrounding the upcoming presidential election pose potential headwinds that could dampen deal activity in the future.
In conclusion, while the resurgence in corporate dealmaking heralds a promising start to the year, stakeholders must remain vigilant amid evolving economic and geopolitical dynamics that could influence the trajectory of deal activity in the months ahead.
