M&A Landscape and Future Prospects

Jul 2, 2024

Lecture Notes: M&A Landscape and Future Prospects

Presenter: Mark Cooper, CEO of Solomon Partners

Key Points

  • Current M&A Environment

    • Hit by rising interest rates
    • Fears of a looming recession
    • Challenging environment over the past couple of years
    • Down 20% year-to-date compared to last year
    • Down close to 40% compared to 2019
    • Idiosyncratic big transactions (e.g., Chevron and Exxon merger)

  • Signs of Recovery

    • Optimism for a better market in 2024
    • Own volume and backlog picking up
    • Private equity returning to the marketplace
    • Expectation of interest rates stabilizing

  • Market Drivers

    • Private Equity's need to return capital to investors
    • Corporate strategic buyers will feel more positive with stable interest rates
    • Price determination still a critical issue

  • M&A Activity Outlook

    • Mostly offensive strategies from companies
    • Companies are looking to gain market share, become more profitable, and competitive
    • Financial buyers adjusting to new pricing realities
    • 500 basis points increase in interest rates requiring multiples to come down
    • Equilibrium in buyer-seller expectations needed for transaction growth

  • Sector-Specific Insights

    • Technology and Healthcare: Expected to see a greater pickup in activity
    • Middle Market M&A: Down dramatically by 35-40%
    • Retail and Consumer: Essential to consolidate for competitiveness
    • Energy: Noted as active with recent mega mergers

  • Challenges

    • Clear price determination and settling prices
    • Impact of dramatic interest rate increases over the past 18 months

  • Conclusion

    • Expect more consolidation, especially in retail and apparel
    • Larger businesses gain critical mass, savings, synergies, and competitive advantages