According to the Bain & Company's mid-year report on the global M&A market in 2024, M&A activities are mainly concentrated in two major industries: the energy industry has seen a significant increase in M&A activities, with a shift from range transactions in the scope of energy transformation to scale transactions in volume consolidation; the technology industry is another active M&A industry, still dominated by growth-oriented range transactions, but the transaction volume is far below the levels seen during the prosperous period of 2020-2021.

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

In the face of challenges such as high interest rates, high inflation, and geopolitical risks, companies are also constantly adapting and adjusting their types and strategies of M&A activities. The M&A activities in 2024 indicate that companies are no longer pursuing cost reduction or revenue growth solely through M&A, but are approaching both aspects simultaneously.

For example, under the pressure of rapid debt repayment, an increasing number of range transactions are premised on achieving economies of scale. At the same time, even scale transactions are achieving growth through product portfolio expansion, new customer acquisition, or market segmentation, based on cost reduction. In addition, to avoid high-cost debt financing, more and more companies (especially energy companies) are using high stock valuations to complete all-stock M&A transactions. In fact, the proportion of all-stock M&A transactions 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 of the global strategic M&A market are roughly the same as those in the second half of 2023. Compared to the sluggishness at the beginning of 2023, the total transaction value has increased by 24%. The private equity and venture capital markets have also stabilized and are showing positive signals of recovery. However, financial investors remain cautious about transactions, due to high borrowing costs, slow exits, and difficulty in raising funds. In terms of regions, the 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 bottomed out. We found in our discussions with corporate executives that they are willing to acquire high-quality companies that will strengthen their own strategic development, but remain skeptical about most assets. The fragile recovery of the IPO market and the long-term holding period of private equity funds indicate that the sellers are still cautious and not eager to sell assets. In addition, public market valuations are still significantly higher than transaction valuations. Although the transaction valuation has increased slightly, the magnitude of the increase is not enough to break the transaction deadlock we pointed out in the 2024 Global M&A Market Report.

Insights on M&A in the Four Major Industries

Energy & Natural Resources Industry: It is worth noting that large-scale consolidation transactions accounted for 25% of the total transactions in the first 5 months of 2024. Last October, ExxonMobil acquired Pioneer Natural Resources for $60 billion, marking the first shot in the commodity market M&A transactions. Shortly after, Chevron announced the acquisition of Hess Corporation for $53 billion in the same month. The scale of transactions in early 2024 was relatively small: Diamondback Energy acquired Endeavor for $26 billion, ConocoPhillips acquired Marathon Oil for $23 billion, and Chesapeake Energy wholly acquired Southwestern Energy for $12 billion. This year, 90% of M&A transactions in the energy industry are mainly concentrated in the traditional oil and gas sector, reflecting the widespread awareness in the market that both businesses and consumers will depend 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 paying more attention to scale-oriented M&A transactions. In manufacturing M&A transactions, over 70% are for expanding business scale, while range trading is for achieving cost synergies. In addition, some multinational buyers are committed to strengthening their U.S. business layout through acquisitions, such as Japan’s Sekisui House 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 range transactions in the industrial industry, pursuing achievable cost synergies has also become an important goal. For example, International Paper expanded its core business to new regions by acquiring DS Smith in the UK, with over $0.5 billion in announced cost synergies, of which $0.475 billion comes from cost reductions. Similarly, Owens Corning expanded its building product portfolio to door products by acquiring Masonite, expecting to drive $0.125 billion in cost synergies.

Healthcare & Life Sciences Industry: The healthcare industry remains a core area for strategic M&A, as companies aim to drive revenue growth and optimize treatment and technology combinations through strategic M&A. For example, Novartis strengthened its radioligand therapy business by acquiring Mariana Technology, while Johnson & Johnson completed the third cardiovascular business M&A transaction in recent years by acquiring Shockwave Medical. In addition, business divestment remains an important means for optimizing business combinations in the healthcare industry. For example, 3M divested its healthcare business Solventum, marking the largest healthcare industry divestiture transaction so far in 2024. Baxter International then announced plans to divest its kidney care division in the second half of 2024, just one year after divesting its biopharmaceutical business. However, divesting business is difficult, and sometimes the divested business is acquired by other companies. For example, Edwards Lifesciences sold its critical care business to Becton Dickinson (BD). Through this transaction, BD enhanced its product portfolio in smart interventional care, while Edwards Lifesciences returned to its core structural heart disease field.

Technology Industry: M&A activity in the technology sector is slowly recovering but has not fully returned to previous levels. The transaction value in the technology industry has almost doubled compared to last year, playing an important role in the overall rise of the strategic M&A market, but the transaction volume has not shown corresponding growth.

There are three main reasons: First, the record high valuations in recent years have made it difficult for both buyers and sellers to reach a consensus, with significant differences remaining in transaction prices; second, many companies find it difficult to fully achieve revenue synergies; third, due to the high cost of capital, growth-oriented transactions are difficult to achieve the expected returns.

From the large-scale technology industry mergers and acquisitions in early 2024, it can be seen that transactions that can reduce debt currently enjoy high valuations. In January 2024, Synopsys announced its acquisition of Ansys for $35 billion, hoping to upgrade its product development software with Ansys' simulation capabilities. This acquisition widens Synopsys' potential market size and is expected to bring in at least $0.4 billion in revenue growth. In addition, this acquisition helps Synopsys achieve rapid deleveraging, with the potential to achieve $0.4 billion in annual cost savings, 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, as evidenced by mergers and acquisitions. In the first quarter of 2024 alone, generative AI companies received at least 110 early-stage investments, totaling $7.5 billion, as start-ups rushed to raise funds to build foundational models. Dealogic data shows that in the first quarter of 2024, there were 11 mergers and acquisitions that acquired full ownership of the target companies. With the expanding demand for generative AI, it is expected that the number of mergers and acquisitions seeking full control will continue to rise in the remaining time of 2024.