According to the Securities Times APP, Bain & Company has released the mid-year report on the global M&A market in 2024. Analyzing the data for 2024 reveals that M&A activities are mainly concentrated in two major industries: M&A activities in the energy industry have significantly increased, shifting from scope transactions related to energy transition to scale transactions focused on volume integration; the technology industry is another active M&A industry, still dominated by scope transactions driven by growth, but the transaction sizes are far below the levels seen during the prosperous period of 2020-2021.

In the first half of 2024, facing ongoing challenges such as high interest rates and strict regulatory scrutiny, companies actively adjusted their M&A strategies and promoted value creation through more mature M&A methods.

Amid challenges such as high interest rates, high inflation, and geopolitical risks, companies are continuously adapting and adjusting their M&A types and strategies accordingly. The M&A activities in 2024 indicate that companies are no longer solely pursuing cost reduction or revenue growth through M&A, but are adopting a dual approach to achieve both.

For example, under the pressure of rapid debt repayment, an increasing number of scope transactions are premised on achieving economies of scale. At the same time, even scale transactions, based on cost reductions, are focusing on growth through product portfolio enhancements, expanding new customers, or segmenting markets. Additionally, to avoid high-cost debt financing, more and more companies (especially energy companies) are using stock market high valuations for all-stock M&A deals. In fact, the proportion of all-stock M&A deals has reached the highest level in 20 years.

Market Overview and Key Insights

As of the end of May 2024, the transaction value and volume in the global strategic M&A market are roughly on par with the second half of 2023. Compared to the sluggish start of 2023, the total transaction value has increased by 24%. Private equity and venture capital markets have also stabilized, signaling a positive trend towards recovery. However, facing issues such as high borrowing costs, slow exit rates, and fundraising challenges, financial investors remain cautious about transactions. Regionally, M&A transactions in the Americas, Europe, the Middle East, and Africa continue to recover and grow, while the Asia-Pacific region continues its downward trend.

The valuation of strategic M&A transactions has slightly increased, indicating that the transaction pricing may have already bottomed out. We have found from discussions with corporate executives that they are willing to acquire high-quality enterprises that contribute to strengthening their own strategic development, but remain skeptical of most assets. The fragile recovery of the IPO market and the long holding period of private equity funds indicate that sellers are still adopting a wait-and-see attitude and are not eager to sell assets. In addition, public market valuations still remain significantly higher than transaction valuations. Although transaction valuations have increased slightly, the magnitude is insufficient to break the transaction deadlock pointed out in our "2024 Global M&A Market Report".

Insights into M&A in the Four Major Industries

Energy and Natural Resources Industry: It is worth noting that large-scale consolidation transactions accounted for approximately 25% of the total transactions in the first five months of 2024. ExxonMobil's acquisition of Pioneer for 60 billion USD in October last year set off the first shot in the commodity market M&A transactions. Subsequently, Chevron announced the acquisition of Hess for 53 billion USD in the same month. The early transactions in 2024 were relatively small: Diamondback Energy acquired Endeavor for 26 billion USD, ConocoPhillips acquired Marathon Oil for 23 billion USD, and Chesapeake Energy fully acquired Southwestern for 12 billion USD. This year, 90% of M&A transactions in the energy industry are mainly concentrated in the traditional oil and gas sector, reflecting the market's general awareness that enterprises and consumers will rely on oil and gas for many years to come, hence energy companies need to strengthen their core position in this area.

Advanced Manufacturing Industry: Industrial enterprises in 2024 are placing more emphasis on scale-oriented M&A transactions in the manufacturing sector. In M&A transactions in the manufacturing industry, over 70% are aimed at expanding the scale of enterprises, while scope transactions are meant to achieve cost synergies. In addition, some multinational buyers are committed to strengthening their U.S. business layout through acquisitions, such as Japan's JSW acquiring U.S. residential construction company MDC Holdings, and Italy's Prysmian Group acquiring Encore Wire to drive U.S. business development.

In many large-scale scope transactions in the industrial sector, pursuing achievable cost synergies has also become a key objective. For example, International Paper expanded its core business to new regions by acquiring the UK's DS Smith, with over 0.5 billion USD synergy announced, 0.475 billion USD of which comes from cost savings. Similarly, Owens Corning expanded its building product portfolio to doors by acquiring Masonite, with an expected cost synergy effect of 0.125 billion USD.

Healthcare and Life Sciences Industry: The healthcare industry remains a core area for strategic M&A, as companies aim to drive revenue growth and optimize their treatment and technology portfolios through strategic acquisitions. For example, Novartis strengthened its radioligand therapy business by acquiring Mariana Technology; Johnson & Johnson completed its third cardiovascular business acquisition in recent years by acquiring Shockwave Medical. Furthermore, business divestiture remains an important means for optimizing business portfolios in the healthcare industry. For instance, 3M divested its healthcare business, Solventum, making it the largest healthcare industry divestiture transaction so far in 2024, while Baxter announced plans to spin off its renal care division in the second half of 2024 after recently divesting its biopharmaceutical business. However, the difficulty of divestiture is high, and sometimes the divested business may be acquired by other companies. For example, Edwards Lifesciences sold its critical care business to BD. Through this transaction, BD enhanced its product portfolio in the smart connected care area, while Edwards Lifesciences returned to the core structural heart disease field.

Technology Industry: M&A activity in the technology industry is slowly recovering but has not yet fully returned to previous levels. Compared to last year, technology industry transaction value has nearly doubled, playing an important role in driving the overall increase in the strategic M&A market. However, the transaction volume has not shown a corresponding growth.

There are three main reasons: first, record-high valuations in recent years have made it difficult for buyers and sellers to reach a consensus, leading to significant price discrepancies; second, many companies struggle to achieve revenue synergies (for more information, refer to "Technology Industry M&A Deals: Focusing on Product Synergies"); third, due to persistently high capital costs, growth-oriented transactions are finding it challenging to achieve expected returns.

From the large-scale technology mergers and acquisitions in early 2024, it can be seen that transactions capable of reducing debt currently enjoy high valuations. In January 2024, Synopsys announced a $35 billion acquisition of Ansys, aiming to upgrade Synopsys's product development software with Ansys's simulation capabilities. This acquisition widens Synopsys's potential market size and is expected to bring at least $0.4 billion in revenue growth. Additionally, the acquisition will help Synopsys achieve rapid deleveraging, potentially realizing $0.4 billion in annual cost reductions, reflecting the company's dual goals of increasing revenue and reducing costs through mergers and acquisitions.

The importance of generative AI in the technology industry is increasingly prominent, which has already been reflected in merger and acquisition activities. With startups competing to raise funds to establish foundational models, in just the first quarter of 2024, generative AI companies received at least 110 early-stage investments totaling as high as $7.5 billion. Dealogic data shows that in the first quarter of 2024, 11 mergers and acquisitions transactions acquired all of the target company's equity. As demand for generative AI continues to expand, it is expected that the number of mergers and acquisitions transactions seeking complete controlling stakes will continue to rise in the remaining time of 2024.