M&A shows positive trend, which should consolidate

M&A shows positive trend, which should consolidate

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Text by Alon Sochaczewski, founder and CEO of Pipeline Capital.

In the latest study by Morgan Stanley, titled Why 2024 Could Be a Hot Year for M&A the institution predicts:

  • Transaction volumes may increase by up to 50% in 2024, following the lowest activity in nearly two decades in 2023.
  • Non-financial companies and private market investors have accumulated a total of $8.1 trillion in unallocated capital, fueling pent-up demand.
  • Banks, energy, healthcare, real estate, and technology are among the sectors poised for an increase in mergers and acquisitions.
  • The resurgence of M&A activity is expected to be global, with the highest number of deals in Europe and North America.

As we move through 2024 (we’re already halfway through the year, have you seen it fly by?), it’s essential to analyze global and national economic conditions and how they impact the mergers and acquisitions (M&A) market.

This year, we’re witnessing a series of significant changes that can influence our business strategies and investment decisions.

International economic context

Globally, inflation rates have shown signs of stabilization after a period of high inflation. Developed countries such as the United States and members of the European Union have managed to implement monetary policies that are beginning to correct inflationary pressures. The gradual reduction of interest rates by central banks has been a response to contain inflation without drastically slowing economic growth.

According to recent analyses by the Financial Times, the expectation is that inflation in the US will remain around 3% in 2024, reflecting tighter control of monetary policies. In the European Union, inflation has also shown signs of slowing down, with forecasts pointing to levels close to 2.5%. These numbers indicate a more stable economic environment, which is favorable for the resumption of M&A activities.

Brazilian economy

In Brazil, the scenario is similar, albeit with particular challenges. According to the Central Bank, Brazilian inflation, measured by IPCA, has a target of 3% for 2024, with a tolerance range of 1.5 percentage points up or down. This inflation control is crucial to maintain investor confidence and stimulate economic growth.

Furthermore, the Central Bank of Brazil recently revised its projections for GDP growth in 2024, now estimated at 1.8%. This positive revision reflects a outlook of economic recovery, despite the difficulties faced in recent years. With the gradual reduction of the Selic rate, currently projected to be 10.75% by the end of the year, a more favorable business environment for investments and acquisitions is expected.

M&A market trends

large deals power 26%  jump in quartely volumes year-over-year to about $712.5 billion globally

The global M&A market is showing signs of recovery, as predicted by Morgan Stanley. After a period of uncertainty caused by the pandemic and subsequent economic turmoil, 2024 has proven to be a year of recovery. Recent data indicates an increase in M&A transaction volume, especially in sectors such as technology, healthcare, and renewable energy. Industry analysts predict that this trend is likely to continue into 2025, with a continuous increase in the number of transactions and the value of deals.

In Brazil, the M&A market is also heating up. Local companies are seeking consolidation to gain efficiency and competitiveness, while foreign investors are eyeing strategic acquisition opportunities. The prospect of a more stable economic environment and the resumption of growth are factors driving this trend.

If it isn’t great, it’s far from bad

Uncertainties are still evident wherever we look, but here at Pipeline Capital, we also see clear indicators that both the global and Brazilian economic scenarios offer promising opportunities for the M&A market. The stabilization of inflation rates and projections of positive economic growth create a favorable environment for new acquisitions and mergers. It is crucial that we remain vigilant to economic changes and adapt our strategies to make the most of these opportunities.

We will continue to monitor these indicators and adjust our approaches to ensure that we are well-positioned to capitalize on these emerging trends in the M&A market. For us and all our business partners.

Text by Alon Sochaczewski, founder and CEO of Pipeline Capital.


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