The 2024 M&A landscape is drawing to a close much like it began—filled with hopes for a breakthrough in the ongoing buyer-seller impasse, according to a new report. Throughout the year, dealmakers have been making careful adjustments to navigate the new realities brought about by elevated interest rates and heightened regulatory oversight.
Anticipation for deal value growth
Bain & Company anticipates that the total deal value will hit $3.5 trillion by the end of 2024, marking a 15 percent increase from the previous year and aligning with levels seen in the mid-2010s. Furthermore, global M&A deal volume has risen by 7 percent year over year, reversing a two-year trend of decline.
Variations among dealmaker categories
The situation varies across different categories of dealmakers. With a slight decrease in interest rates, both private equity and venture capital have regained momentum, evidenced by a 29 percent increase in private equity deal value and a 30 percent rise in venture capital year over year. Corporate M&A, which is less sensitive to minor fluctuations in borrowing costs, is projected to finish the year 12 percent above 2023 levels, exhibiting steady growth across all regions. Robust strategic activity in sectors such as energy & natural resources, industrials, and financial services, as well as significant growth in retail and telecommunications, contributed to these advancements. However, sectors traditionally strong in M&A, like technology and healthcare & life sciences, continue to lag behind historical performance.
“Despite strong balance sheets and a strategic need for M&A in 2024, dealmakers didn’t see the positive momentum they hoped for on interest rates, seller willingness to exit, and regulatory scrutiny that would drive a full recovery this year,” remarked Suzanne Kumar, executive vice president of Bain & Company’s M&A and Divestitures practice. “The most effective dealmakers excelled in two key areas: they swiftly adapted to the market realities—transitioning from traditional methods to embrace both revenue and cost synergies. Additionally, they refined their M&A capabilities as frequent acquirers, concentrating on screening, negotiating, and utilizing new tools, such as generative AI, to enhance the process.”
Challenges with deals amid historically low valuations persist
A survey conducted by Bain involving over 300 M&A executives identified the primary barrier to M&A activity as the disconnect in valuation expectations between buyers and sellers. A significant factor in this is the disparity between historically low strategic M&A valuations (10.4x EBITDA/EV) and the high public market valuations (16.6x for S&P 500).
To avoid substantial markdowns at exit, private equity and venture capital investors have chosen to hold their portfolios. Similarly, private and public companies with the option to do so have opted to wait. Consequently, a lack of urgency and diminished competition has led to some deals stalling.
Navigating through regulatory scrutiny and extended closing periods
As obstacles and legal challenges lengthened deal closing timelines and affected close rates throughout 2024, nearly half (47 percent) of dealmakers reported that regulatory concerns influenced the types of deals their companies were willing to consider this year. In light of this, many are revising their deal strategies and spending more time on upfront screening, evaluating potential deals for antitrust issues early in the process. Some have even paused deals pending national elections, hoping for greater clarity regarding future regulatory frameworks.
This situation has resulted in a barbell effect, where companies are focusing either on smaller, less visible deals or large transactions with significant value creation potential, while mid-sized deals have been deprioritized. In 2024, transactions valued at less than $1 billion made up 95 percent of all activity, marking the first increase in this category in four years. Meanwhile, megadeals—those exceeding $5 billion—have driven overall deal value.
Bain expects that changes in U.S. and EU administrations, along with revised guidelines in India and Japan, may foster a more open regulatory stance in the future, although the timing, extent, and nature of any easing will likely vary by sector and market.
Adapting strategies to the new realities of elevated interest rates
In response to persistently high interest rates, strategic acquirers have become more selective in their deal choices, demanding clear value creation, showing less willingness to pay for long-term revenue growth, and significantly adapting to the new M&A value equation by pursuing both revenue and cost synergies simultaneously.
As a result, scale deals—those designed to enhance market leadership and reduce cost positions through economies of scale—accounted for 59 percent of deal value in 2024, the highest percentage since 2015. This reflects a shift towards acquisitions that promise tangible, bankable synergies within the first year, contrasting with the previous trend of scope M&A, which aimed to accelerate top-line growth by entering faster-growing markets or acquiring new capabilities.
Increasing reliance on generative AI for efficiency and cost savings
In 2024, early adopters have begun utilizing generative AI for sourcing, screening, and refining their overall due diligence processes. Bain’s survey found that one in five M&A practitioners has leveraged generative AI for M&A activities this year, up from 16 percent in 2023. An additional 16 percent plan to utilize it within the next year.
These early adopters report that generative AI minimizes manual tasks (noted by 79 percent of users), speeds up timelines (54 percent), and cuts costs (33 percent).
Looking ahead to 2025
Bain & Company is set to release its comprehensive 2025 M&A Report in February, featuring an in-depth analysis of what to anticipate in the realm of dealmaking for the coming year, a thorough examination of several key industries, and the complete findings from its M&A Practitioners’ 2025 Outlook Survey, which includes insights from over 300 M&A practitioners across the U.S., Australia, Brazil, Canada, France, Germany, India, Italy, Japan, and the UK.
