Since mid-2023, M&A deals started to take off, rising 16% between July and September and reversing the downward trend brought on by interest rate hikes, according to the Quarterly Deal Performance Monitor (QDPM) report by WTW. The reason for this new increase and possible change in trend is none other than the growing number of opportunities to acquire booming businesses.
This year, large deals — those valued at more than $1 billion — are expected to keep slowing down. However, a rebound in smaller deals is also expected, as buyers look for businesses with greater growth potential, especially in segments that are becoming clear future trends.
Sectors
There's no doubt that artificial intelligence played a leading role last year, a role that will continue in 2024 and will have a knock-on effect on corporate transactions in other sectors — although a deal's success will depend on the buyer's ability to build a culture that supports AI-driven innovation and its power to improve the employee experience.
According to PwC's 2024 M&A trends report, alongside this technology enabler, other segments that will also drive corporate activity are semiconductors, vehicle electrification, energy storage, biotechnology, and insurance brokerage.
According to the consulting firm, the sectors that will benefit from these levers are aerospace and defense, mining and metals, energy and utilities, pharmaceuticals, industrial manufacturing, automotive, and technology.
BlackRock, the world's largest asset manager, points to five megatrends that will shape deals in the coming years. In addition to artificial intelligence, mentioned above, it highlights accelerated urbanization, since “mass migration to cities will demand new business models and infrastructure”; the demographic and social shift toward a lifestyle that will change consumption and healthcare systems due to a considerable increase in life expectancy; climate change (renewable energy, sustainable infrastructure) and resource scarcity; and the wealth of emerging economies, since “newly affluent consumers will expand across Asia and all emerging markets.”
7 acquisition opportunities
In addition to keeping in mind the sectors mentioned above, which have greater future potential due to the structural changes the world as a whole is going through, it's essential to spot opportunities.
The first is to look for dissatisfied customers within a sector. That is, look for niches where you can add value by improving customer service, whether through greater digitalization or another change aimed at that improvement. At the same time, changing consumer habits also stand out, since identifying them in time can be a major advantage that puts you ahead of the competition.
A good opportunity for an M&A process can also arise when it brings an improvement to the company's end product or service. Whenever something can be done better and more competitively, it represents a good business opportunity.
Other points have to do with legislative changes. For example, if a ban is coming in a country, it may be the right time to enter that market.
Finally, a geographic study to find out in which market each product performs best, so you can focus on those markets depending on your business.
Other specific situations that create good investment opportunities have to do with the lack of a successor, which will be a common problem in less than a decade as baby boomer business owners retire, or when an SME offers good products or services but lacks the financial muscle it needs to keep growing. These last two points are essential and offer very interesting entry points for investors, since these are good businesses that only need help with management or funding to take off.
At Deale, we already have more than 3,000 SMEs from a range of sectors registered and looking for a financial or strategic partner to help them grow. Visit our platform and discover them.
