M&A Deal Volumes Jump As CEOs Hunt Down Acquisitions

A closely watched market trends barometer is forecasting a 20% rise in M&A deal volume as chief executives look to make acquisitions and divest assets. Hunt Scanlon Ventures founder, Scott A. Scanlon, examines the latest report highlights.

After a year of wait-and-see, 2024 is proving to be action time for U.S. dealmaking. EY’s forecast in its just-released midyear EY-Parthenon Deal Barometer predicts corporate M&A deal volume rising 20% year-over-year – nearly doubling the original 12% predicted in the inaugural Barometer release in January. 

PE deal volume, meanwhile, will increase 16% year-over-year, compared to 13% predicted in January. Through April 30, according to EY, there has been a 69% increase in deal value and a 22% increase in deal volume for deals over $100 million.

The Deal Barometer uses historical economic and financial market indicators to predict future trends in corporate M&A and PE deal activity, and is a collaboration between EY chief economist Gregory Daco and leaders from EY Strategy and Transactions – including Mitch Berlin, EY strategy and transactions Americas vice chair, who advises CEOs and boards on strategic dealmaking.

Over the last three years, dealmaking has fluctuated remarkably, surging to record levels in 2021 and early 2022, before a sharp decline starting March 2022 due to the Fed’s aggressive policy tightening to knock back high inflation. 

Future-proofing

The EY-Parthenon midyear analysis predicts a considerable rise in activity this year, while still watching inflation. Insights from EY Macroeconomics data shows U.S. economic activity remains resilient, and insights from the April EY CEO Outlook survey points to an increase in CEOs looking to make acquisitions and divestments. 

In that report, chief executives and institutional investors revealed a positive M&A outlook for corporate deals and PE activity in 2024. “CEOs are looking at deal-making activity as a key lever to address their near-term priorities,” it noted, with the top deal drivers being the acquisition of technology, new production capabilities or innovative startups. 

“CEOs are also looking at their current portfolio of assets and operations and considering what will help their longer ambitions,” the EY CEO Outlook report concluded. The spike in intentions to divest assets over the next 12 months, it said, which is broadly based across geographies and sectors, “highlights how far CEOs are along their path to future-proofing for a different environment.”

“CEOs are also looking at their current portfolio of assets and operations and considering what will help their longer ambitions.”

M&A Rebound Into 2025

“For corporate M&A, the EY deal tracker estimates corporate M&A deal volume rising this year by significant double digits, following a 17% drop in 2023, signaling a return toward pre-pandemic levels of activity,” said Scott A. Scanlon, founder and CEO of Hunt Scanlon Ventures. 

He said according to EY the number of deals in 2024 are predicted to be only about 4% below the average number of deals in 2017-2019. “It is quite a turnaround,” he said. 

The optimistic scenario according to EY-Parthenon, he noted, points to deals rising 31% year-over-year, while the pessimistic scenario shows a muted recovery with an increase of 13%.

“For private equity M&A, the Deal Barometer expects U.S. PE deal volumes to rebound 16% year-over-year, following a 15% contraction last year,” he noted. While this would still leave deal volumes below their 2021 peak, it would represent a faster pace of growth than the average 9% annual pace from 2010 to 2019.

In EY-Parthenon’s optimistic scenario, PE deal volumes would rise faster in 2024, up 23% year-over-year, while the pessimistic scenario shows an increase of 8%. 

Consolidation & Expansion

Despite extremely tight monetary policy, the U.S. economy remains resilient and many believe the chances of a recession are now quite low, said Mr. Scanlon. “Companies are using M&A to consolidate and fuel expansion,” he said. “Those were two of the common drivers for dealmaking in April according to EY-Parthenon,” he noted.

“Companies are using M&A to consolidate and fuel expansion. Those were two of the common drivers for dealmaking in April according to EY-Parthenon.”

Through April 30, there have been 429 large deals (over $100 million) totaling $657 billion in the U.S. – representing a 22% increase in volume year-over-year (353 deals) and a 69% jump in deal value ($387 billion). April saw 111 large deals made – a 46% increase compared to April 2023 (76 deals) – which totaled $131 billion (compared to $101 billion in 2023).

The sectors driving M&A activity this year through April 30 include technology (113 large deals totaling $154 billion); life sciences (72 large deals totaling $96 billion); and energy (64 large deals totaling $152 billion). 

According to EY, the robust increase in larger deal activity year-over-year underscores increased confidence in the M&A market over the past few months. As the macroeconomic outlook stabilizes, strategic corporate actions will be undertaken by major companies to improve profitability and drive innovation.

Also increasing is dealmakers’ confidence in the market. This is due to the stabilization of several macroeconomic factors, namely The Fed’s belief that inflation will continue softening despite seeming persistent, and its signaling of a potential rate cuts towards the latter end of the year if unemployment or inflation reaches target levels.