Down 35% Last Year... But This Year, Expectations Are High
Optimism in Medical, Real Estate, and Technology Sectors
Global investment bank Morgan Stanley forecasted on the 5th (local time) that the volume of mergers and acquisitions (M&A) transactions worldwide will increase by 50% compared to last year, according to foreign media including Bloomberg.
Morgan Stanley stated, "The frozen M&A market is thawing, and expectations for a soft landing of major economies will lead the market recovery."
The strategy team led by Andrew Sit at Morgan Stanley conducted a survey of Morgan Stanley analysts across 150 global industries. Among the analysts who participated in the survey, half expected M&A activity in their respective sectors to increase over the next 12 months, while 39% anticipated no change.
Respondents identified Europe (67%) and North America (63%) as the markets that would benefit the most from the global M&A recovery. They also viewed South Korea, India, Australia, Japan, and ASEAN (Association of Southeast Asian Nations) as favorable environments for M&A.
The global M&A market in 2022?2023 suffered significant damage due to aggressive interest rate hikes by major central banks, high inflation, and recession concerns. According to Morgan Stanley, on a non-inflation-adjusted basis, global M&A transaction volume fell by 35% last year, marking the lowest level since 2004. The volume relative to the nominal GDP of the United States recorded its lowest point in about 30 years.
However, expectations for reduced borrowing costs by the end of this year, continued cooling of consumer prices, hopes for a soft landing of major economies (where economic growth slows but does not sharply decline), and rising corporate confidence are analyzed to drive the recovery of global M&A activity. Global stock markets are rebounding, high-yield bond issuance is increasing, and corporate cash holdings remain high.
The key beneficiary sectors from this year’s M&A activation are identified as healthcare, real estate, consumer staples, and technology. Additionally, demand for technological capabilities such as artificial intelligence (AI) and cloud computing, the transition to clean energy, and life sciences innovation are expected to be drivers for successful M&A deals. The biggest obstacles to M&A transactions were cited as recession risks and regulations.
Funding for M&A is expected to rely more on cash or debt rather than equity. Morgan Stanley explained, "Abundant cash and an open investment grade market mean financial advantages for M&A activities."
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