The 2024 Outlook for Mergers and Acquisitions: Navigating a Surge in Energy, Tech, and Health

By Ritesh Dudeja & Sidharrth Shankar

Inspired by a convergence of favourable economic indicators, the mergers and acquisitions (M&A) environment seems promising as we enter 2024.

Early in 2024, India’s M&A market showed signs of resiliency with a strong recovery. Deal values increased by 78% to $6.3 billion in January 2024 from $3.6 billion the year before, according to LSEG Deals Intelligence. A thriving year is coming thanks to this remarkable rebound, driven by the consumer staples, industrial, and telecommunications industries. In the telecom sector, deal values have increased by 697% to $2.5 billion, or 39.7% of the market. However, due to persistent macroeconomic and geopolitical uncertainty, the number of M&A transactions fell to 137, showing a trend towards fewer but larger agreements and a cautious but strategic approach to the market.

Let’s look at a few pointers which would boost the activities in 2024.

Economic and Market Catalysts

The S&P 500 Index, a barometer for stock market health and broader economic sentiment, has instilled optimism among investors and corporate strategists. This optimism is further amplified by the fortified state of corporate balance sheets, granting firms the fiscal latitude to embark on ambitious growth strategies through acquisitions. The thaw in financing markets, offering more accessible and cost-effective capital, primes the M&A landscape for a prolific year.

Sector-Specific Surge: Energy, Tech, and Health

The Energy, Technology, and Health sectors are poised to spearhead the M&A wave in 2024, each propelled by a distinct driver:

Energy: Companies are merging to better adapt to the regulatory landscape, invest in renewable energy projects, and leverage emerging green technologies. The global shift from fossil fuels to sustainability underscores this sector’s transformation, making it a hotbed for M&A activity.

According to Invest India, India is poised for significant growth in the renewable energy sector by 2024, with the government aiming for 500 GW of non-fossil fuel-based energy by 2030. The country’s installed renewable energy capacity has remarkably increased, with a 396% rise in non-fossil fuel capacity in the last 8.5 years. Solar and wind capacities have also experienced significant growth. India aims to produce five million tonnes of green hydrogen by 2030, supported by 125 GW of renewable energy capacity. This growth is facilitated by favourable government policies, including up to 100% FDI under automatic routes for renewable energy projects and incentives like the Production Linked Incentive (PLI) Scheme for solar PV modules​.

Technology: The rapid pace of innovation, particularly in artificial intelligence (AI), blockchain, and IoT, underscores the tech industry’s aggressive M&A approach. In particular, AI is poised to be a significant driver of M&A activity.

According to PwC Global Outlook 2024 Outlook, Global M&A Trends in Technology, Media & Telecommunications, with digitalization and technological disruption trends ongoing, the technology sector is highlighted as a bright spot for M&A activities in 2024 and beyond. The sector’s resilience is underpinned by its role in facilitating enterprise spending on artificial intelligence, cloud computing, and cybersecurity technology, which are expected to drive growth in the tech market.

Health: The integration of technology in healthcare, including telehealth and AI-driven diagnostics, coupled with the push for scale, drives the Health sector’s M&A trend.

According to KPMG 2024 Healthcare and Life Sciences Investment Outlook, the hospitals and health systems sector is looking towards M&A and partnerships to gain scale and share resources, with more than 60% of survey respondents expecting deal volume to rise in 2024.

Resurgence of Private Equity

Armed with substantial dry powder, private equity firms are expected to play a crucial role in shaping the M&A narrative. The strategic deployment of this capital towards value-accretive acquisitions could redefine market dynamics, emphasizing the sector’s agility in navigating economic uncertainties.

Strategic Asset Sales and Exits

Corporate portfolio optimization emerges as a key theme, with companies increasingly looking to divest non-core assets. This strategic realignment, driven by the need to enhance shareholder value and focus on core competency, will likely spur asset sales and exits.

Navigating Challenges: Macroeconomic and Geopolitical Considerations

Despite the optimistic outlook, the report cautions against macroeconomic uncertainties and geopolitical tensions. These factors pose potential headwinds to M&A activity, necessitating a cautious and strategic approach to deal-making.

Signing Off

Strategic acquisitions and growth-driven mergers are highly desirable in the current landscape, with the Energy, Technology, and Health sectors demonstrating leadership. Notwithstanding the encouraging outlook, legal restrictions and geopolitical unrest remain obstacles. A thriving M&A market is anticipated to be sparked by the opportunity provided by solid company balance sheets, better financing terms, and industry-specific drivers. Keeping up with these trends is essential for professionals and investors to navigate the potential and complexity of the changing M&A market.

(The authors are Ritesh Dudeja is a Partner at Acclime India, and Sidharrth Shankar is a Partner at JSA, Advocates & Solicitors. Views expressed are personal.)