We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The mergers and acquisitions (M&A) market in 2023 faced unique challenges, setting it apart from the rest of the financial landscape. While signs of economic recovery were on the horizon, M&A activity grappled with slowdowns and a more complex regulatory environment.
Challenges in the M&A Market in 2023
In 2023, the M&A market proved to be less eventful compared to other financial sectors. It faced headwinds such as economic slowdowns and increasing regulatory complexities, making it a challenging environment for deal-making.
One of the predominant challenges in 2023 was the regulatory landscape. Ansari highlights that navigating the regulatory requirements had become increasingly intricate. Companies operating globally found themselves entangled in regulatory hurdles, not only in the United States but also in other countries, including the UK, EU, and even Saudi Arabia's antitrust group.
Another significant issue was the time it took to complete M&A deals. High-profile deals involving companies like Microsoft, Activision, Broadcom, and VMware illustrated the protracted timelines. Prolonged deal completion times raised concerns for CEOs and decision-makers who began questioning the feasibility and desirability of M&A transactions.
Outlook for M&A Activity in 2024
Kamran Ansari, Venture Partner at Headline, shed light on the potential directions M&A activity could take in 2024, as quoted on Yahoo Finance. Private equity firms have been actively acquiring software companies within the $1 to $10 billion range. However, this trend may slow down as the most attractive targets have already been acquired. Larger companies that remain in this range may necessitate the formation of consortiums for acquisition.
When it comes to the latest M&A trends, business leaders expect to see a resurgence as we move into 2024, according to EY, as quoted on foley.com. Based on the latest EY CEO Outlook Pulse survey, 98% of CEOs anticipate actively engaging in strategic transactions within 12 months, representing a notable increase from the 89% reported in January 2023.
ESG Integration: Environmental, social, and governance (ESG) considerations are becoming central in M&A transactions. Companies are increasingly evaluated not just on financial performance but also on their commitment to sustainability and ethical practices???.
Generative AI in M&A Processes: There is a growing use of generative AI in M&A processes, particularly in due diligence and target selection. This is expected to scale up in 2024, enhancing efficiency and decision-making in deal strategy and structuring???, as quoted on KPMG.
These sectors are focusing on building more resilient supply chains and are looking to M&A as a strategy. Investments in digital capabilities and the transition to electric vehicles are major drivers of M&A activity in these industries??????, as quoted on alpha-sense.com.
Financial Services: In the financial services sector, improving tech capabilities and expanding into new geographies are key drivers for M&A. Digital transformation remains a priority, with fintech companies setting the pace for technological change.
Bottom Line
As we move into 2024, optimism around a comeback year for deal-making exists. However, the M&A landscape continues to evolve, with private equity becoming an increasingly attractive option for companies and investors seeking smoother and more predictable exits.
ETFs in Focus
Against this backdrop, investors should keep a close tab on M&A ETFs like IQ Merger Arbitrage ETF (MNA - Free Report) , AltShares Merger Arbitrage ETF (ARB - Free Report) , First Trust Merger Arbitrage ETF (MARB - Free Report) and Proshares Merger ETF (MRGR - Free Report) . These funds offered returned in the range of 0.3% to 1.9%, in the past one month (as of Jan 5, 2024).
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
What Lies Ahead of M&A ETFs in 2024?
The mergers and acquisitions (M&A) market in 2023 faced unique challenges, setting it apart from the rest of the financial landscape. While signs of economic recovery were on the horizon, M&A activity grappled with slowdowns and a more complex regulatory environment.
Challenges in the M&A Market in 2023
In 2023, the M&A market proved to be less eventful compared to other financial sectors. It faced headwinds such as economic slowdowns and increasing regulatory complexities, making it a challenging environment for deal-making.
One of the predominant challenges in 2023 was the regulatory landscape. Ansari highlights that navigating the regulatory requirements had become increasingly intricate. Companies operating globally found themselves entangled in regulatory hurdles, not only in the United States but also in other countries, including the UK, EU, and even Saudi Arabia's antitrust group.
Another significant issue was the time it took to complete M&A deals. High-profile deals involving companies like Microsoft, Activision, Broadcom, and VMware illustrated the protracted timelines. Prolonged deal completion times raised concerns for CEOs and decision-makers who began questioning the feasibility and desirability of M&A transactions.
Outlook for M&A Activity in 2024
Kamran Ansari, Venture Partner at Headline, shed light on the potential directions M&A activity could take in 2024, as quoted on Yahoo Finance. Private equity firms have been actively acquiring software companies within the $1 to $10 billion range. However, this trend may slow down as the most attractive targets have already been acquired. Larger companies that remain in this range may necessitate the formation of consortiums for acquisition.
When it comes to the latest M&A trends, business leaders expect to see a resurgence as we move into 2024, according to EY, as quoted on foley.com. Based on the latest EY CEO Outlook Pulse survey, 98% of CEOs anticipate actively engaging in strategic transactions within 12 months, representing a notable increase from the 89% reported in January 2023.
ESG Integration: Environmental, social, and governance (ESG) considerations are becoming central in M&A transactions. Companies are increasingly evaluated not just on financial performance but also on their commitment to sustainability and ethical practices???.
Generative AI in M&A Processes: There is a growing use of generative AI in M&A processes, particularly in due diligence and target selection. This is expected to scale up in 2024, enhancing efficiency and decision-making in deal strategy and structuring???, as quoted on KPMG.
These sectors are focusing on building more resilient supply chains and are looking to M&A as a strategy. Investments in digital capabilities and the transition to electric vehicles are major drivers of M&A activity in these industries??????, as quoted on alpha-sense.com.
Financial Services: In the financial services sector, improving tech capabilities and expanding into new geographies are key drivers for M&A. Digital transformation remains a priority, with fintech companies setting the pace for technological change.
Bottom Line
As we move into 2024, optimism around a comeback year for deal-making exists. However, the M&A landscape continues to evolve, with private equity becoming an increasingly attractive option for companies and investors seeking smoother and more predictable exits.
ETFs in Focus
Against this backdrop, investors should keep a close tab on M&A ETFs like IQ Merger Arbitrage ETF (MNA - Free Report) , AltShares Merger Arbitrage ETF (ARB - Free Report) , First Trust Merger Arbitrage ETF (MARB - Free Report) and Proshares Merger ETF (MRGR - Free Report) . These funds offered returned in the range of 0.3% to 1.9%, in the past one month (as of Jan 5, 2024).
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)