US drives rebound in global M&A deals

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Global merger and acquisition deals hit $1.5tn in the first half of 2024 as a surge in US takeovers and an uptick in megamergers offset a declining number of acquisitions.

The value of deals struck was 22 per cent higher than a year earlier, according to mid-year data compiled by the London Stock Exchange Group, driven by a 70 per cent rise in big deals worth more than $10bn.

But the total number of deals fell 25 per cent to a four-year low, with acquisitions worth $500mn or less — the smaller takeovers that make up the backbone of the deal market — falling 13 per cent by value.

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

The tentative recovery comes after M&A activity slid to a 10-year low in 2023 as interest rates rose from the ultra-low levels that stoked a pandemic-era deals boom. But it remains fragile.

One senior European banker said: “There’s concerns about the consumer, there’s concerns about elections, rates haven’t come down as fast as people had hoped. All of that introduces more volatility.”

The US was an engine of activity in the first half of this year, with the value of deals up 43 per cent to $796bn, more than half the global total and the country’s largest share of the global market since 2019.

European dealmaking kept pace to rise 43 per cent by value, while the Asia-Pacific region declined 21 per cent.

Top deals that advanced in the second quarter included US oil and gas producer ConocoPhillips’s move to buy its smaller rival Marathon Oil for $22.5bn, the latest in a series of tie-ups in the Permian Basin sparked by Chevron’s acquisition of rival Hess.

Meanwhile, the Abu Dhabi National Oil Company is nearing a €14.4bn agreement to take over the German chemicals group Covestro after boosting its proposed offer this month.

Deals in energy rose 27 per cent this year to $254bn, according to the report, the best sector behind technology.

Still, an uptick in big deals has not been enough to completely shake M&A from its post Covid-19 doldrums, with deal volumes in the three months to the end of June on track to stay below $1tn for the eighth consecutive quarter.

While middle-market deals continued at a slower pace, financial services proved a bright spot for transactions, with deal volumes in the sector up 60 per cent on the same period last year, bolstered by Capital One’s February agreement to acquire rival Discover Financial for $35.3bn.

Investment bankers and lawyers advising on deals said large companies had been increasingly willing to approach potential targets now the macroeconomic environment had begun to stabilise and as they grew impatient to pursue their long-term plans.

Not every approach has been successful — Australian miner BHP’s £39bn effort to take over Anglo American, for example, collapsed in May after a frenzied six-week pursuit.

“Large strategics have been waiting to forge ahead with a long-term plan,” said Ben Wilson, a senior managing director in Guggenheim Securities’ mergers and acquisitions group. “And there are fewer trapdoors.”

Private equity-backed M&A, a focus for dealmakers, rose 40 per cent in the first half of the year as buyout investors sit on a record number of assets that they must sell down to generate returns for their backers.

Larger banks such as Goldman Sachs, JPMorgan and Morgan Stanley increased their share of the M&A advisory fee market to about 35 per cent of the global total, although this remained slightly less than boutique banks led by New York’s Centerview Partners.

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

This article has been amended to correct the name of the acquirer of Hess