Here's what's boosting M&A activity in 2024: PwC deals exec.

So far, merger and acquisition activity in 2024 has outpaced that of 2023.

PwC Private Equity Lead & Deputy Deals Leader Kevin Desai joins Asking For A Trend to give insight into the M&A market and what could come next after a period of uncertainty.

Desai notes that dealmaking volume is starting to look more like how it did pre-pandemic. He points to a number of factors that are boosting activity, including rising executive confidence, stabilizing inflation, and a returned focus to cash flow.

Desai believes things will become a bit more clear after the elections and a potential interest rate cut: "As the Fed has made it a little bit more clear which direction of travel will be for interest rates, that is giving a little bit more certainty, specifically to financial or private equity investors, as to what the cost of capital will be, and it allows them to model around the uncertainty around interest rates. A little bit of a headwind will be potentially the election. Typically in election years, we see a little bit of softness in September and specifically October ahead of elections."

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Nicholas Jacobino

Video Transcript

The mergers and acquisitions market showing signs of recovery, taking shape after a lethargic 2023 overall deal value rises to $535 billion in the first five months of 2024.

This according to PWC, that's nearly a 30% rise compared to the same period a year ago.

But despite this welcome boost, head of wins linger in the path ahead for the M and A market here to discuss is PWC private equity lead and deputy deals leader Kevin decide Kevin, it is good to see you.

So this number does jump out of you.

Kevin overall deal value first five months of the year 535 billion up about 30%.

What is driving that Kevin Josh first.

Uh Thanks for having me today and to, to talk about our report.

It's, it's a good question in general first and it's important to realize that the levels of deal volume that we're seeing today are starting to look a lot like pre pandemic, normal levels of deal volume and value.

We really think that 2023 was the trough of, of, of deal value frankly.

And what's really driving the increase now is there's a rise in executive confidence, there's a stabilization in inflation.

Um The M and A recovery is really gonna be driven by strong corporate profits return to cash flow focus and, and a um a stemming of the tide of interest rates really and understanding what direction interest rates will go.

You also, Kevin the report, you specifically call it A I and energy transition opportunities.

Talk about those catalysts.

Absolutely.

So A I is a hot topic for most of our corporate and private equity clients is they are looking for finding ways to transform their businesses, looking at new pieces of technology that may exist A I is obviously one that is necessary to look at to make sure that their businesses are not being uh disintermediated into the future.

So A I is a catalyst in that it is giving people an opportunity to look at investments come up with new investment, theses in a real time way.

And Kevin, so that was, you know, first half of the year when you look into the back half of the year.

Now, what are you seeing?

What do you forecast?

Well, we're really seeing a kind of a tale of two cities, but really the as as the FED has made it a little bit more clear what direction of travel will be for interest rates.

Um that is giving a little bit more certainty specifically to uh financial or private equity investors as to what the cost of capital will be.

And it allows them to model around the uncertainty around interest rates.

A little bit of a, a headwind will be potentially the election typically in election years, we see a little bit of softness in September and specifically October ahead of elections.

So we, we expect a little bit of a rebound this summer with the off before hopefully a very strong end to Q four me, Kevin, you would, you would suspect that after the election, at least at that point, who's ever, who's ever gonna be the White House?

At least at that point, CEO S have some degree more clarity about, OK.

These are the economic policies, this is a regulatory environment and maybe that, that clarity gives a little bit more confidence, could be another another tail in there.

That's right, Josh, in general, uncertainty is what we feel is holding back the M and A volume and the M and A uh industry in general and as interest rates have started to subside and we know the direction of travel as then what whatever happens with the election, there will be a little bit more certainty as to what the direction of travel will be for regulation, which, which we've our CEO survey would say about 64% of CEO S would say that the uh regulatory environment today is causing some hindrance to their business.

So understanding what the direction will be uh post election will allow dealmakers to uh to model around the uncertainty.

We talked to M and a Kevin.

Let's talk IP OS as well.

I'm interested the trends you're seeing there, what you see ahead.

I mean, you know, you look at, you look around Kevin.

I mean, the economy is growing stock markets working, you would think, you know, that'd be a good time to go public, wouldn't it?

Um Absolutely.

I think we, we're actually seeing a pretty good boost in IP O volumes as well, right?

We were seeing more IP OS in the first six months of the year so far than almost all of last year combined.

And um as you're showing on screen right now, there's already uh 13, almost $14 billion of IP O and, but the difference is that we're seeing very high quality assets, getting access to the capital markets today.

Um businesses with experience, management teams, businesses with good cash flow profiles, those seem to be able to access the IP O markets, which is then giving confidence to the broader investment community.

So we're really seeing an uptick in IP OS uh uh for, for the, the second half of the year and hopefully on to 2025 Kevin, appreciate you coming on the show and breaking down this report.

Thanks for joining us.

Thank you.