While big M&A deals abound, many smaller ones hit pause button

The mergers and acquisitions market is in a state of flux as 2024 heads to a close. Even as the volume of large deals is rising, the volume of smaller ones is declining as many dealmakers, concerned over the potential for regulatory changes stemming from global elections, are extending transaction timelines.

The third quarter of this year featured the closing of 46 acquisitions valued at more than $1 billion. It was the highest quarterly level in two years and a 31% increase over deal volume in last year’s third quarter, according to Willis Towers Watson’s Quarterly Deal Performance Monitor.

There were also 13 so-called “megadeals,” valued at more than $10 billion, compared with six during the same period in 2023.

“Confidence inside corporate boardrooms for large M&A deals is on the upswing,” said David Dean, managing director of M&A consulting for WTW. “Despite continued uncertainty, particularly with the forthcoming U.S. election, we are seeing positive signals for deals in the coming months, given renewed optimism, the expectation of more interest rate cuts, and improving valuations.”

However, the number of all deals worth at least $100 million has gradually fallen from 188 closed in the final three months of 2023 to 157 in the most recently ended quarter.

And, notably, companies completing M&A deals have generally struggled to compete with the wider market based on share-price return, underperforming by -9.0 percentage points during this year’s third quarter, according to WTW.

Another analysis, released by Datasite, a software platform that helps enterprises execute complex, strategic projects such as acquisitions, revealed strong effects tied to upcoming elections around the world.

In Datasite’s survey of 620 M&A professionals in the United States, U.K., France and Germany, 45% said they extended their timelines this year to accommodate potential election-related disruptions, including regulatory changes.

Also, 81% of those dealmakers said they were very or somewhat concerned about the impact of national elections on global M&A activity over the next 12 months, particularly citing increased trade tensions and global interdependent supply chains.

“With a record share of the world’s population voting this year, there are implications for economic and market performance that add another layer of complexity to M&A transactions,” said Datasite CEO Rusty Wiley.

Global dealmakers are placing greater emphasis on deal quality these days, Wiley noted. “Buyers are seeking deeper insights and greater disclosures from sellers, reflecting a more discerning approach, where thoroughness is prioritized over haste,” he said.

Most dealmakers expect risk assessment (65%), followed by regulatory requirements (58%) and diligence management (33%), to be the most challenging aspects of completing deals in the next 12 months, according to the Datasite research.

The WTW research, meanwhile, identified Europe as the only region to buck the negative share-performance trend seen in the broader M&A market. Dealmakers there recorded the region’s first positive quarter since 2021, with an outperformance of +2.1 percentage points.

In contrast, acquirers in North America underperformed their regional share-price index by -10.1%, the seventh consecutive quarter that buyers have been outclassed by industry peers, WTW reported. Buyers in the Asia-Pacific region underperformed their regional index by -3.1 percentage points.

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