Industry Q&A – Marc Cooper with Jeff Jacobs

Industry Q&A – Marc Cooper with Jeff Jacobs

by CEO Marc S. Cooper

Head of M&A Jeff Jacobs and I recently discussed last year’s hurdles in the US M&A market and his outlook for the remainder of 2024.

What challenges did the US M&A markets face in 2023?

The US M&A markets were challenging for much of 2023. Acquirors faced uncertainty at every turn as the Fed steered policy in hopes of achieving a soft landing for the economy. Inflation burdened the cost of financing and the Administration’s increasingly tough stance on antitrust kept potential merger partners on edge. Furthermore, wide bid-ask price gaps also kept many buyers and sellers sidelined, particularly Private Equity, who often adopted a “wait-and-see” approach to M&A.

Do you see any signs headwinds are easing?

There are signs that some of these headwinds are easing. US equity markets started the year near all-time highs. The Fed announced it was holding rates steady and signaled the potential for rate cuts in 2024. CEO confidence is edging up and many Boards are eager to greenlight M&A as a complement to slowing organic top line growth. Likewise, financial sponsors are holding an estimated $2.8tn of unrealized investments. The private equity machines have no choice but to kick back into gear to start monetizing assets and returning capital to LPs.

Do you expect M&A volumes to increase in 2024 and which sectors do you anticipate will be especially active?

Overall, deal backlogs are up meaningfully and, barring any exogenous events for the remainder of Q1, many expect M&A to pick up in the new year. Areas ripe for activity include Technology (particularly anything involving AI), Healthcare and Infrastructure.

How might this November’s presidential election impact M&A activity in the US?

That is the big unknown for M&A activity in the US in 2024. Historically, the presidential election has sometimes caused a pause in activity, particularly if the outcome is uncertain or potentially polarizing.

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