M&A 2024 outlook after a difficult year for dealmakers

For negotiators, 2024 is a year to look forward to, if only because 2023 was not necessarily a year to celebrate.

Despite some notable deals, the year presented challenges for bankers and lawyers who advise corporate clients on large acquisitions and IPOs.

Global mergers and acquisitions. fell to its lowest level in 10 years. Around 53,529 deals worth a total of $2.9 trillion were announced, an annual decline of 17% in volume, according to LSEG data.

The most active sectors included energy – led by Exxon Mobil’s takeover of Pioneer Natural Resources and Chevron’s acquisition of Hess – and health care, led by Pfizer’s roughly $43 billion purchase from cancer drug maker Seagen.

The story was worse for IPOs, which fell 25 percent year-over-year to a combined revenue of $109.8 billion, a 14-year low. That’s despite notable market debuts including semiconductor designer Arm, grocery delivery app Instacart and sandal maker Birkenstock.

This reflects the continuing concern of company boards regarding a range of factors, from the global economy to geopolitical tensions, according to Viswas Raghavan, co-head of global investment banking and CEO of Europe, Middle East and Africa at JPMorgan Chase.

As his firm tops the investment banking rankings for 2023, he spoke with DealBook about the year in deals and what will shape dealmaking in 2024.

This interview has been edited and condensed.

How would you describe the feeling in boardrooms these days? I was thinking of JPMorgan CEO Jamie Dimon’s recent comment that “maybe it’s the most dangerous moment the world has known for decades.

What’s plaguing boardrooms right now is geopolitical uncertainty. If you look at what lies ahead, the countries that represent almost half of global GDP are going to choose a leader over the next 12 months. You have two wars on our doorstep. And then there is China – China and trade, the Chinese national economy with regard to non-performing loans, the health of businesses, etc.

There are also antitrust and supervisory agreements through various competition authorities. A global agreement will take much longer, from around 12 months historically, to probably 18, 24 months, or even longer.

Looking at where we are, trading volume is at its lowest level in a decade. Did you expect this low level of activity?

The investment banking fee pool was $135 billion in 2021, and the state-run constant rate is about $80 billion per year. This year it will be somewhere in the $65 billion zip code. And it’s probably the lowest level in almost two decades.

But remember, we come from a world that thought the end was upon us in 2020 with Covid. You’ve seen this mountain of quantitative easing. There was excess liquidity in the system, and you saw asset prices reflect that excess liquidity. You knew it would go down.

Arm, Instacart and marketing software company Klaviyo became public in September. There was a feeling that the IPO window might reopen. Obviously, that didn’t happen. Were you surprised by the death of the market?

Not really. I don’t think anyone thought the floodgates had opened. This market has always been incredibly selective and it will continue to remain so.

Is the market closed? No. Do our teams work on many transactions? Absolutely. But is it sort of “bring it on, any name flies”? Absolutely not.

Someone told me that if someone held some sort of auction, there would naturally be some interest from Saudi Arabia or the United Arab Emirates.

That’s a fair comment. This is naturally part of their strategy to diversify and make them more global.

They are great players. They have great firepower. They also project their own influence and the fact that they have arrived, that they want to be dominant.

What are the big things you’re looking for next year: the big tailwinds and the headwinds?

I think the headwinds are geopolitical, geopolitical and geopolitical. The tailwinds are a calming of inflation, a return to growth and a downward trend in rates.