According to PwC’s Global M&A Industry Trends 2024 Outlook report, the mergers and acquisitions market will return to an upward trajectory in 2024, marking the end of a two-year period during which it saw its biggest contraction in a decade.

In 2023, both transaction volume and value declined by 6% and 23%, respectively, compared to the previous year, continuing the decline that began in 2022. Over the past two years, the total value of transactions has halved and the number has decreased by 17%, with mega-transactions suffering the most (-60%).

“This year’s recovery is expected to be different and moderate compared to the trading enthusiasm of late 2020 and especially the record year of 2021. There are three key factors that support optimism in this regard: the positive evolution of financial markets in the last period, caused by the slowdown in inflation and the expectation of lower interest rates, the demand/supply of deals and the strategic need of many companies to adapt and transform their business models. In 2023, Romania continued to grow against the world, being on the increase in value thanks to large transactions of more than one billion euros in energy and retail. 2024 has started positively and this trend is expected to continue, even if it will most likely not reach last year’s significance,” said Dinu Bumbecea, country managing partner and head of PwC’s advisory practice in Romania.

In 2023, compared to 2022, global deal volumes increased in aerospace and defense, mining and metals, energy and utilities, pharmaceuticals, industrial manufacturing, automotive and technology. It looks like these sectors will continue to attract investment this year and into future areas of focus. for sub-sectors include artificial intelligence, semiconductors, electric vehicles, batteries and energy storage, biotechnology, space technology, healthcare and insurance brokerage.

“The M&A market must continue to deal with high economic volatility, geopolitical tensions, tighter regulations, disruption to supply chains and an election year that could cause changes in several of the world’s largest economies. The sectors that will remain in the eyes of investors in 2024, including in Romania, are energy, financial services and technology,” said Dinu Bumbeca.

High-value deals, which have been hit hardest by the volatility of recent years, showed the first signs of recovery in the final quarter of last year, with Exxon’s $59.5 billion takeover of Pioneer and Chevron’s Hess takeover of last year’s biggest deals. for 53 billion dollars.

The start of the year brought news of several big deals in the pipeline, such as Hewlett Packard’s $14 billion acquisition of Juniper Networks, Blackrock’s $12 billion acquisition of Global Infrastructure Partners.

Adapting to a different M&A market. Funds haveunused trillions of dollars

Private investors can help boost M&A activity, especially with a concentration of $4 trillion in untapped capital and $12 trillion in assets under management, nearly double 2019’s pre-pandemic level.

As many private equity funds approach or exit standard portfolio investment maturities, they will experience increasing pressure from their partners to exit and return capital.

Due to pent-up buyer demand and reluctance to sell below valuations, we expect quality assets to be very competitive when they come to market. In these situations, preparation will be important, and speed can be a critical differentiator, the report said.

The attractiveness of mergers and acquisitions of companies has also increased. At a time when the rapid changes generated by global megatrends, in particular digitalization and decarbonization, are leading to major transformations, companies are reassessing their strategies and seeking to reinvent themselves in order to remain competitive.

In addition, credit conditions in early 2024 have improved markedly compared to 2023, when institutional lenders were trying to consolidate debt and debt markets were effectively closed.

Article supported by PwC Romania