Data released last week by Pitchbook show signs of a recovery in global M&A activity through the first half of 2024, pushing past lingering headwinds from higher interest rates, valuation gaps, and regulatory scrutiny.
Deal volume through the end of Q2 is tracking 10-15 percent ahead of the same point in 2023 across both deal count and aggregate transaction value—an estimated 21,945 deals worth $1.47 trillion were announced or closed through June.
"We expected 2024 to be a recovery year in M&A given that it almost always rebounds from consecutive annual declines," said Tim Clarke, Lead Analyst for Private Equity at PitchBook. "The recent upturn has been fueled by banks re-entering the market, lending to dealmakers again, and competing with the nonbanks that moved in while they were absent."
This jump in liquidity has provided what amounts to a de facto rate cut for dealmakers, with all-in borrowing costs declining by as much as 100 basis points over the past year in certain pockets of the market. The compression in spreads comes even as most central banks have kept benchmark rates on hold (with the European Central Bank a notable exception).
Private equity activity, which had been more heavily impacted by higher rates, is also on the rebound: sponsors' share of total deal volume jumped to 41 percent in Q2, up from 34 percent in the prior quarter and ending a nearly two-year trend downward.
A notable trend behind the numbers is an uptick in take-privates: Silver Lake topped the table with its $13.0 billion deal for the portion of Endeavor it didn’t already own, and was joined by Permira's $6.9 billion acquisition of Squarespace, Advent International’s $6.3 billion purchase of Nuvei, and Thoma Bravo's $5.3 billion takeover of Darktrace, among a handful of other large deals.
Valuation trends suggest the market may now be on steady ground after the reset over the past two years. The median EV/EBITDA multiple of 9.5x for transactions announced or closed in the first half remained unchanged from the full-year 2023 mark, as did EV/revenue at 1.6x.
A widening gap has emerged between public and private market valuations, however. While transaction multiples have moved sideways (the vast majority of which are private company deals), trading multiples have continued to rise—the S&P 500 median EV/EBITDA multiple jumped by nearly 9 percent over the past 18 months to 14.5x. While far from an exact science, a reversion to the historical public-private valuation spread could mean an upward trend in private valuations through the back half of the year.