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Challenging macroeconomics and geopolitical headwinds saw dealmaking decline by 31% in Europe, the Middle East and Africa (EMEA) during the first half of 2024, in line with global trends that saw a thick fog of uncertainty descend on M&A markets.
Deal values in EMEA hold steady from a year ago, showing a 1% increase, but remained below the levels recorded from 2020 to 2022, and pre-Covid, PwC revealed in its 2024 mid-year outlook on Global M&A Industry Trends.
Based on LSEG data, the EMEA region saw eight megadeals in the first half of 2024, compared to nine in the whole of 2023, with a total deal value of $231 billion, according to the report. Total deal volume for H1 24 reached 7,409 deals, with a total value just shy of $500 billion.
Globally, while the value of M&A deals rose by 5% in the first half of 2024, compared to H1 2023, overall transaction volume fell by 30%, continuing a downward trend that started in 2022. In the first half of 2024, deal volumes were just over 21,000 and deal values reached $1.3 trillion.
“This is a far cry from the record levels of activity in the second half of 2021, which saw almost 34,000 deals and deal values of $2.7 trillion,” the report stated.
Biggest deals in GCC
A separate study by Kuwait Financial Centre ‘Markaz’ revealed, the GCC market sealed a total of 48 closed transactions throughout Q1 2024, implying a decline of 13% year-over-year. While the UAE claimed the lion’s share with 21 closed transactions, followed by Saudi Arabia, closing a total of 20 transactions, all other markets in the region remained stable or saw a decline in their M&A activities.
According to Markaz, the biggest deal in the GCC this year has been the $2 billion stake sale in GEMS Education by private equity firm CVC Capital partners in June, to a consortium led by Canadian investment firm Brookfield Asset Management.
The US-based LyondellBassell Industries secured second place with its January acquisition of a 35% stake in the Saudi-based National Petroleum Industrial Company (NATPET) from Alujain Corporation, valued at $498.2 million.
Outlook for the year
Several factors have contributed to the slower M&A market over the past two years, including higher interest rates, an uncertainty about policy direction with two major elections on the way in the UK and the US, followed by global tensions rising from the Russia-Ukraine conflict and the Israel-Gaza war, PwC noted in the report.
The US–China relationship, which continues to weigh on markets, while further uncertainty stemming from weakening economy could see a tip into recession, making growth challenging, it said.
“The daunting combination of high interest rates, current valuations and political uncertainty has been a showstopper for many deals. Nevertheless, the strategic need for M&A continues to grow stronger, creating pent-up demand which will be unleashed as these uncertainties resolve,” said Brian Levy, Global Deals Industries Leader, Partner, PwC US.
The lower levels of M&A activity over the past 2.5 years have created pent-up demand (and supply), particularly in the private equity (PE) universe, the report cites. In addition, corporates are turning to M&A to accelerate growth and reinvent their businesses at a time of dynamic change.
Helping dealmakers in this changing dynamic is financing for M&A, which is more readily available now than it was over the past two years. The investment-grade debt market, high-yield bond market and leveraged loan market all have shown stronger issuance activity in the first half of 2024 than in the first half of 2023.
“Strong preparation and restoring confidence will be key for the resurgence of M&A activity. We are already seeing signs that deal preparation is gearing up, and once confidence follows, we expect the market — and dealmakers — will move quickly,” Lucy Stapleton, Incoming Global Deals Leader, Partner, PwC UK said.
(Reporting by Bindu Rai, editing by Seban Scaria)
