The merger and acquisition (M&A) market showed signs of rejuvenation in Q2 2024 as optimism began to return among dealmakers. While the M&A environment had struggled to break free from a prolonged slump over the past two years, the latest data and survey insights suggest a growing confidence in the market’s trajectory. According to a mid-year survey by KPMG, more than half of U.S. dealmakers expect deal volumes for 2024 to exceed last year’s totals, with this bullish sentiment extending into 2025. Private equity (PE) firms, in particular, showed the greatest optimism, with 70 percent anticipating an increase in deal activity in 2024 compared to 2023 and 84 percent projecting further growth in 2025. This expectation of rising deal volumes reflects a strategic pivot towards transformational M&A as firms seek to reshape their operations and capitalize on market shifts.
A distinct trend driving this surge involves the increasing emphasis on large-scale, transformational deals that alter the core nature of businesses. Nearly four in 10 PE firms anticipate pursuing at least one such significant transaction this year, highlighting a strategic appetite for deals that redefine business models and competitive landscapes. Corporates also share this focus, though to a slightly lesser degree, with many aiming to leverage acquisitions to drive strategic shifts rather than incremental expansions. This trend aligns with broader market conditions, where shifting valuations, fluctuating interest rates, and inflationary pressures heavily influence decision-making. Dealmakers indicate that even minor adjustments in interest rates—specifically, a decline of 25 to 50 basis points—could significantly boost deal flow, underscoring how sensitive M&A activity remains to macroeconomic variables.
The technology and healthcare sectors continue to stand out as hotbeds of M&A activity, reflecting ongoing digital change across industries and the urgent need for innovation in life sciences. Within technology, PE firms increasingly incorporate generative artificial intelligence (GenAI) into their acquisition strategies, seeking to bolster their portfolios with cutting-edge AI capabilities. In contrast, corporations are leveraging GenAI more in their dealmaking processes rather than directly acquiring GenAI companies, demonstrating varied approaches between strategic buyers and financial sponsors. These differing strategies illustrate a broader divergence in how companies seek to harness technology-driven disruption, with each path tailored to unique business needs and competitive pressures.
Geopolitical issues further shape the current M&A landscape, influencing both the timing and nature of deals. Conflicts such as those in Ukraine and tensions in the Asia-Pacific region prompt many firms to accelerate M&A plans as part of a strategic response to geopolitical risks. Approximately 38 percent of survey respondents reported that geopolitical concerns have either expedited their M&A timelines or increased their focus on securing strategic assets. Meanwhile, private equity firms cite antitrust regulation as a pivotal factor in dealmaking decisions, with compliance concerns shaping their investment strategies. The evolving regulatory environment thus plays a critical role, balancing the opportunities presented by the M&A market against the potential pitfalls of increased scrutiny.
As the market progresses, the outlook for M&A remains cautiously optimistic, buoyed by the strategic imperatives that drive companies to pursue growth through acquisitions despite potential hurdles. The push towards transformational deals, the integration of advanced technologies, and the navigation of complex geopolitical landscapes all underscore a dynamic and evolving deal environment. While challenges such as fluctuating valuations and regulatory headwinds persist, the underlying drivers—ranging from technological innovation to strategic consolidation—suggest that dealmakers will continue to seek out value in every corner of the market, confident in the long-term benefits of well-executed M&A strategies.