A&O Shearman Sheds Light on Global Dealmaking in New Report
In an era marked by economic uncertainty and regulatory scrutiny, A&O Shearman has released a comprehensive report offering insights into the current state of global mergers and acquisitions (M&A). The analysis, based on a review of over 2,000 private M&A deals across 13 years, provides a detailed understanding of the trends shaping the market in 2024 and beyond.
Market Trends and Deal Activity
The report highlights several key trends that are influencing dealmaking in 2024. Auction activity has remained steady, with no significant increase or decrease compared to previous years. This stability suggests that competitive bidding processes continue to be a preferred method for achieving favorable terms, particularly for sellers.
Private equity, which has been a dominant force in M&A activity, is beginning to feel less pressure. This easing of pressure could signal a return to more normalized market conditions, with increased competition among private equity firms for attractive targets.
Deal protection dynamics have shifted as both buyers and sellers adapt to increasingly complex regulatory environments. This shift reflects a growing demand for certainty and security in deal terms, particularly in uncertain economic conditions.
Regulatory scrutiny remains a significant factor in cross-border deals. Foreign investment approvals were required in approximately one-third of high-value transactions, highlighting the ongoing impact of protectionist policies and regulatory oversight.
Reps and warranties (R&W) insurance has become a cornerstone of modern M&A transactions. Used in three-quarters of auction deals, this type of insurance demonstrates the desire of both buyers and sellers to allocate risk effectively and ensure smoother deal execution.
Macroeconomic and Regulatory Pressures
The M&A environment in 2024 has been further complicated by macroeconomic volatility. Fluctuating interest rates, inflation, and a rapidly changing geopolitical landscape have all contributed to a challenging dealmaking climate.
Regulatory factors have loomed particularly large this year. There has been a notable rise in merger control enforcement, with a dramatic 50% increase in transactions abandoned due to antitrust concerns compared to previous years.
In key jurisdictions such as the U.S., investigations have become longer and more thorough. Regulatory authorities are also more likely to block deals outright rather than approve them with conditions, adding another layer of complexity for would-be dealmakers.
While some political changes may hint at potential regulatory easing in the future, the outlook for certain sectors—particularly technology—suggests that tough oversight is likely to remain a reality.
Deal Execution and Market Outlook
Dealmakers are facing greater challenges in pricing assets due to unpredictable shifts in trade policies and equity market volatility. This uncertainty has led many boards to hesitate when considering the sale of assets, as they seek assurance of fair value before committing to a deal.
The increased complexity of the M&A landscape has also resulted in longer completion times for deals. Extended regulatory approvals and heightened market nervousness have contributed to delays, making it more difficult for parties to reach a successful outcome.
Despite these challenges, the market has shown signs of resilience. Both buyers and sellers are increasingly seeking protection through contractual mechanisms, such as R&W insurance, to mitigate risks. Auction processes, which offer competitive and transparent terms, have also gained favor as a means of navigating uncertain markets.
Innovation in deal structures has emerged as a key strategy for overcoming transaction obstacles. Sectors such as life sciences and defense have seen particularly creative approaches to dealmaking, as parties seek to adapt to the evolving landscape.
For more detailed insights, you can access the full report here.
Deal Execution and Market Outlook
The analysis also reveals that auctions continue to be a highly effective strategy for sellers, consistently delivering better deal terms compared to bilateral negotiations. This trend underscores the value of competitive bidding processes in driving favorable outcomes for sellers.
Dealmakers are grappling with increased difficulty in pricing assets, a challenge compounded by unpredictable shifts in trade policies and equity market volatility. This uncertainty has led many boards to hesitate when considering the sale of assets, as they seek assurance of fair value before committing to a deal.
The complexity of the M&A landscape has also resulted in longer completion times for deals. Extended regulatory approvals and heightened market nervousness have contributed to delays, making it more difficult for parties to reach a successful outcome.
Despite these challenges, the market has shown signs of resilience. Both buyers and sellers are increasingly seeking protection through contractual mechanisms, such as reps and warranties (R&W) insurance, to mitigate risks. Auction processes, which offer competitive and transparent terms, have also gained favor as a means of navigating uncertain markets.
Innovation in deal structures has emerged as a key strategy for overcoming transaction obstacles. Sectors such as life sciences and defense have seen particularly creative approaches to dealmaking, as parties seek to adapt to the evolving landscape.
For more detailed insights, you can access the full report here.
Conclusion
In conclusion, the M&A landscape remains complex yet resilient, with auctions proving to be a reliable strategy for achieving favorable deal terms. While challenges such as asset pricing difficulties, regulatory delays, and market volatility persist, innovative deal structures and risk-mitigation tools like reps and warranties insurance are helping buyers and sellers navigate uncertainty. As the market continues to evolve, adaptability and strategic foresight will be critical for successful dealmaking.
Frequently Asked Questions
Why are auctions becoming more popular in M&A deals?
Auctions are gaining favor because they provide competitive and transparent terms, often resulting in better outcomes for sellers compared to bilateral negotiations.
What is causing longer completion times for M&A deals?
Extended regulatory approvals and heightened market uncertainty are key factors contributing to longer completion times for M&A deals.
How are buyers and sellers mitigating risks in uncertain markets?
Parties are increasingly using contractual mechanisms such as reps and warranties (R&W) insurance to protect against risks and ensure fair value in transactions.
Which industries are leading in innovative deal structures?
Sectors such as life sciences and defense are at the forefront of creative dealmaking, adapting to the evolving M&A landscape with innovative approaches.
