US mega deals dominate global M&A in Q1

World-wide M&A activity increased 38%, year-on-year in Q1, driven largely by large domestic US acquisitions, particularly in the Energy & Power, Technology and Financials sectors. India’s growth can’t fully off-set China’s ongoing deal drought, but Europe’s positive momentum gives reason for optimism. Ultimately, a depressed global mid-market will need turning around if hopes for a full M&A recovery are to materialise.  

• US M&A accounts for 61% of $798bn global total.
• Promising recovery in Europe pushes Q1 value above $140bn.
• Asia-Pacific deals fall 28% to 2013 levels, at just $105bn.

It’s hard to over-state the dominance of the United States in global M&A so far this year. 

With US target companies accounting for 61% of world-wide deals in the first three months of 2024, you must go back to 1989 to see a deal-making world this lop-sided.  

In absolute terms, US deal values have certainly been healthy: up 78% on the same period in 2023, to $484bn – the largest aggregate value in three years. But relative to international peers, the State-side recovery is an outlier, with US targets accounting for 14 of the largest 15 transactions in the opening quarter. In all but one, the acquirer was domestic US too. 

The recovery has also been lop-sided in terms of ticket size, with mega deals ($10bn or larger) more than doubling, year-on-year to $278bn. By contrast, mid-market deals ($500m or smaller) have fallen by a fifth in value and a third in number compared to Q1 2023. 

The big question is whether the US large-cap recovery merely reflects companies taking advantage of this window of relative stability prior to election season and its consequent uncertainties. Or is it the start of a real recovery that proves catalytic, both internationally and across smaller domestic deals? Watch this space. 

One positive indication is that private equity firms increased their M&A activity, compared with the opening quarter of 2023, by 13% to reach $154bn. Buyout groups now account for 19% share of the M&A market, which is historically high but somewhat below the record levels seen in recent years. 

The early signs are positive for Europe. The region’s M&A rainmakers appear to be shaking off the many macro and geo-political shocks of early 2023, to hit $142bn worth of signed deals in Q1, a 58% increase year-on-year. 

The trajectory looks less promising for Asia-Pacific, where M&A declined over the same period by 28% to total just $105bn, the slowest opening quarter since 2013. However, performance at a regional level is polarised between its two major economies, with China M&A falling 37% year-on-year, and India rising 48%. 

Generally, across emerging markets, it has been a difficult start to the year, with M&A down 10% in Q1, to a 15-year low of $119bn.

The sector make-up of global M&A deals so far this year offers a revealing insight into shifting investor interest. A 37% rise in technology sector M&A was not enough to maintain its leader-board status. That accolade goes to the Energy & Power sector, where the value of deals jumped 80% to reach $146bn, or 18% of the M&A market – undoubtedly driven by the major stimulus provided by US domestic energy policy. 

Meanwhile, Financial sector M&A was also resurgent, rising 72% to reach $105bn. Deals included the year’s largest so far: Capital One’s agreement to buy New York -listed Discover Financial Services for $35bn, to create a global payments platform. 

Investment banking fees for Q1 reflect the polarised market, with income up 15% in the Americas, flat in EMEA, and down elsewhere. 

In the global M&A rankings, the first three months of 2024 sees Goldman Sachs retake the top place from JP Morgan, while the latter moves to second place. Both topped the $200bn mark, to share half the global market between them. Morgan Stanley shrugs off a difficult opening quarter in 2023 to take third place so far this year, while Evercore soars back into the top 10 as the world’s fourth most active financial adviser.