A challenging year for mergers and acquisitions

DLA Piper has published its 2024 Global M&A Intelligence Report, which provides a comprehensive analysis of trends and challenges in the global mergers and acquisitions (M&A) market as observed by its lawyers. The report is based on 750 M&A deals completed during 2023, as well as more than 5,500 deals that DLA Piper has analyzed over the 10 years of the report.

Image: José María Gil-Robles, partner in charge of the Corporate department; Joaquín Echánove, partner at Corporate; Pablo Echenique, partner of corporate and M&A and Andrés Lorrio, partner in charge of Capital Markets.

Global mergers and acquisitions activity continues to face challenges

The report notes that global M&A activity continues to face challenges. Both deal volume and deal value recorded significant declines in 2023, but there are some positive signs in the first half of 2024. The US M&A market and US buyers and sellers continue to have a strong influence on the global M&A market and, although it has been one of the strongest regions, it is experiencing lower levels of activity than might be expected, which is having a knock-on effect globally.

Longer and more prone to pauses or termination of conversations

During the period under review, it was observed that transaction processes have become more protracted and more prone to pauses or the termination of talks. The lack of pressure in a less active market has allowed buyers to deepen due diligence and maintain a firm stance on the legal terms of deals. However, transactions in large deals and competitive processes that were finalized were conducted on terms that favor sellers, a trend that has persisted for more than a decade and that the report says is changing more slowly than expected.

Emerging trends

The report also identifies emerging trends in the market. The use of contingency liability insurance, the influence of artificial intelligence (AI) on operations, as well as ESG issues, merger control and foreign direct investment.

Also highlighted are those sectors in which special activity is seen. Healthcare and biotech, agribusiness, energy (especially with the repowering of wind farms), infra, dc’s fiber and others, Internet, software and IT service, Financial, insurance or consulting, auditing and engineering services. Pablo Echenique, partner of corporate and M&A emphasized during the presentation of the report that: “regulatory paralysis is paralyzing the energy processes”.

According to Benjamin Parameswaran, Global Co-Head of Corporate at DLA Piper: “The next 12 months offer reasons for optimism. The uncertainty caused by the convergence of electoral cycles in many of the major Western democracies will be over and interest rates and inflation appear to be falling around the world. We also see that the nature of the trades being made is changing and innovations, driven largely by technology and AI, are changing the way trades are made.”

Joaquín Echánove, partner at Corporate, who also views the market’s revival with some optimism, commented, “In our Global M&A Intelligence Report we have identified several key trends in the market. These include an increased intensity in certain due diligence processes (lengthening processes and sometimes leading to price adjustments) and a certain rebalancing of positions between buyer and seller. However, we also see that, in transactions of a certain size, certain more pro-seller tendencies are maintained, such as auction processes to try to maximize price, as well as the search for clean exits by limiting the seller’s liability through the inclusion of severe warranty limitations, if not the imposition of W&I insurance, and the prevalence of the locked-box system as a price-fixing mechanism”.

And José María Gil-Robles, partner in charge of the Corporate department in Spain, has underlined that, “Although the market is not as markedly pro-seller as in previous years, this has not been transferred to the transaction documents.”

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