Global M&A volumes to rise by 50% in 2024, says Morgan Stanley

The corporate logo of financial firm Morgan Stanley is pictured on the company’s world headquarters in the Manhattan borough of New York City, Jan 20, 2015. REUTERS/Mike Segar/File Photo

Global deal-making volumes will rise by 50 percent this year compared to 2023 as fears over funding costs, inflation and recession concerns abate, Morgan Stanley said in a note on Monday.

“We think that this ‘winter’ for mergers and acquisitions (M&A) is thawing and activity is set to return cyclically and secularly,” the Wall Street brokerage said.

Morgan Stanley expects Europe and North American regions to benefit the most from deal-making activity, but also sees favorable M&A weather for India, Australia, South Korea, Japan and Asean (Association of Southeast Asian Nations) countries.

Aggressive interest rate hikes by major central banks, high inflation and recessionary fears hurt global M&A activity in 2023.

READ: Global mergers & acquisitions plunged in Q2 but dealmakers see green shoots

Global deal-making volumes sank 35 percent last year, the lowest reading since 2004, before adjusting for inflation, while volumes as a percentage of U.S. nominal gross domestic product was the lowest in at least three decades, Morgan Stanley said.

Expectations of a cut in borrowing costs later this year, a sustained cooling in consumer prices, hopes of a ‘soft landing’ of major economies and an increase in corporate confidence are likely to drive the rebound of M&A activity.

Demand for artificial intelligence (AI) and cloud capabilities, clean energy transition and innovation in life sciences will also be additional drivers for pickup in deals, Morgan Stanley added.

READ: US energy M&A slows in Q3, but mega deals in Oct seen to spark activity

The brokerage sees health care, real estate, staples and technology sectors to be the primary beneficiaries of deal-making.

In terms of funding deals, cash and debt look more attractive than equity despite the rise in bond yields, Morgan Stanley said.

“Ample cash balances and wide-open investment grade markets mean that strategic activity has a financial advantage, while sponsors may face more urgency whatever the macro ‘weather’,” the brokerage added.