The US is driving the initial rebound in global mergers and acquisitions

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Global M&A transactions reached $1.5 trillion in the first half of 2024, as a surge in U.S. acquisitions and a rise in megamergers offset declining acquisition volumes.

According to half-year data collected by the London Stock Exchange Group, the value of transactions concluded was 22 percent higher than a year earlier, driven by a 70 percent increase in the number of large transactions worth more than $10 billion.

But the total number of deals fell 25 percent to a four-year low, and acquisitions of $500 million or less — the smaller acquisitions that make up the backbone of the deal market — fell 13 percent in value.

“This year for mergers and acquisitions is much better than last,” said Anu Aiyengar, global head of mergers and acquisitions at JPMorgan. “But it’s a low bar because last year was difficult.”

The initial recovery comes after M&A activity fell to a 10-year low in 2023 as interest rates rose from ultra-low levels that sparked a pandemic-era deal boom. But it remains fragile.

One senior European banker said: “There are concerns about consumers, there are concerns about the elections, interest rates have not come down as quickly as expected. All of this creates more volatility.”

The driving force for activity in the first half of this year was the United States, where transaction value increased by 43 percent to $796 billion, representing more than half of the world’s total transaction value and the country’s largest share of the global market since 2019.

Deal value in Europe increased by 43 percent, while in the Asia-Pacific region it decreased by 21 percent.

Among the biggest deals in the second quarter was U.S. oil and gas producer ConocoPhillips’ decision to buy smaller rival Marathon Oil for $22.5 billion, the latest in a series of acquisitions in the Permian Basin sparked by ExxonMobil’s takeover of rival Hess.

Meanwhile, Abu Dhabi National Oil Company is close to striking a €14.4 billion deal to acquire German chemical group Covestro after increasing its proposed offer this month.

Energy transactions grew 27 percent this year to $254 billion, the report said, representing the top sector behind technology.

However, the increase in large-scale deals has not been enough to completely break the post-Covid-19 M&A slump, with deal volume in the three months to end-June expected to remain below $1 trillion for the eighth quarter in a row.

While middle market deals continued at a slower pace, financial services proved to be a strong spot for deals, with deal volume in the sector up 60 percent compared to the same period last year, boosted by Capital One’s February agreement to acquire rival Discover Financial for $35.3 billion

Investment bankers and lawyers advising on the deals said large companies were becoming more willing to move closer to potential targets now that the macroeconomic environment has started to stabilize and as they become more impatient to execute on their long-term plans.

Not every approach has been successful – for example, Australian miner BHP’s £39 billion effort to take over Anglo American collapsed in May after a frantic six-week chase.

“Large strategic firms have been waiting to move forward with a long-term plan,” said Ben Wilson, senior managing director in the mergers and acquisitions group at Guggenheim Securities. “And there are fewer pitfalls.”

Private equity-led mergers and acquisitions, the focus of dealmaking, surged 40 percent in the first half of the year as buyout investors amassed a record number of assets that they need to sell to generate returns for their backers.

Larger banks such as Goldman Sachs, JPMorgan and Morgan Stanley have increased their share of the M&A advisory fee market to about 35 percent of the global market, although this is still slightly less than boutique banks led by New York-based Centerview Partners.

Goldman Sachs was the lead financial adviser on mergers in the first half of the year, leading in the US and Europe.