Dive Brief:
- The aggregate value of U.S. merger-and-acquisition deals spiked 42% in July over the prior month, despite persistent macroeconomic challenges, Ernst & Young said in a report.
- A total of 141 U.S. deals were recorded last month, a 33% increase compared with June, according to the analysis, which was shared with CFO Dive. The combined deal value rose to $124 billion.
- “Despite the headwinds, M&A activity should remain resilient, mainly due to large deals driven by well-capitalized firms looking to strengthen their market positions and capitalize on favorable acquisition terms,” according to EY.
Dive Insight:
A number of large deals were announced in July including Eli Lilly’s plan to buy Morphic Holding, a Massachusetts-based biotechnology company, for $3.2 billion as well as oil and natural gas producer Devon Energy’s $5 billion agreement to acquire the Williston basin business of Grayson Mill Energy.
According to EY, opportunities in sectors such as technology, energy and life sciences “are driving deal activity, buoyed by trends in digital transformation, sustainability and healthcare innovation.”
The findings come as economic challenges, including inflation and premature forecasts for interest rate cuts, prompted some analysts to soften earlier predictions of a robust M&A recovery this year.
The global value of M&A activity in the first half of 2024 rose to $1 trillion, up 4% compared with the year-earlier period but below the 10-year average of $1.5 trillion, according to a report published by global management consulting firm Boston Consulting Group in July.
“The M&A market has been active in 2024, but its rebound from last year’s trough has been slower than many observers anticipated,” BCG analysts said in the report. “Even as financial conditions have generally improved, dealmakers remain cautious amid economic uncertainty, concerns about inflation and monetary policy, and regulatory and geopolitical headwinds.”
Complicating matters, the July jobs report signals a significant weakening in the labor market, with the economy adding only 114,000 jobs, mostly in healthcare, leisure and government sectors, EY said in its latest report.
In addition, wage growth has slowed to 3.6%, and the unemployment rate has risen to 4.3%, its highest since October 2021, the report noted, adding that factors such as geopolitical tensions are also coming into play, along with tailwinds such as digital transformation.
“Together, these factors create a complex environment for M&A activity, demanding strategic agility and insight from participants,” EY said.
