2024 outlook
Key sectors in 2024
Technology, Media and Communications
Mergermarket's Intelligence Heat Chart for M&A in Europe for H1 2023 suggests that the TMC sector will be the most lively this year, in particular in the mid-market, where returns are better than from more mature businesses and less risky than from start-ups.
- Many businesses are looking to acquire technology assets to enhance their services and products, whether that be AI, software, automation, robotics or otherwise.
- Tech businesses will continue to be popular with PE funds, with their strong potential for growth.
- The UK is likely to retain its position as one of the most active European dealmaking markets, substantially thanks to its strong technology sector.
- But other European countries are seeing a good supply of tech start-ups that will be ready for exit in the near future.
- The sector will also be acquisitive; there are reports of TMC businesses keen to invest in AI, customer service and education of its workforce.
Artificial Intelligence
AI will drive plenty of dealmaking activity in 2024.
- Acquirers are looking for proprietary data targets that can be bought to develop or train the acquirer's AI systems.
- Others are looking to add to their technology and services by acquiring AI tools; businesses in certain sectors where there is a clear use case for AI, such as law, edtech and fintech will actively pursue M&A deals to acquire AI assets.
- AI infrastructure deals are likely to take place where cloud providers or data centres look to take stakes in AI start-ups so that they are the preferred supplier of infrastructure to them.
- AI start-ups are looking to acquire chip manufacturers so that they can make their own chips in-house.
- Acquisitions relating to AI will raise specific intellectual property, reliability of output and data privacy concerns in due diligence and SPA negotiation.
- AI is tipped to be a leading technology seeking European PE and VC funding in 2024, with the potential for significant returns on investment.
- Acquirers and investors in this space will need to keep abreast of national government and European policy initiatives on AI. For example, in the last few months, the EU has agreed the details of its AI Act, which is the most sweeping rulebook of its kind for the technology though unlikely to come into force until 2025-2026.
Energy and Utilities
The move towards net zero will lead energy companies to turn to acquisitions to become more competitive, substitute revenue lost through the energy transition and enhance their decarbonisation reputations.
- Renewables businesses are likely to be attractive targets, with solar and storage targets particularly appealing in Europe.
- Lively activity is also forecast for targets that provide solutions for waste management, recycling, sustainable mobility and energy efficiency.
- Automotive companies will also acquire to buy in technologies and resources to decarbonise their vehicles, and electric vehicle infrastructure is also likely to be a target for acquirers.
- Manufacturing businesses may also seek to reduce emissions by acquisition of research and development capabilities.
- Climatetech and cleantech will also feature prominently in venture deal activity.
Logistics
The logistics industry is ripe for consolidation; there are a number of smaller players in the sector. Logistics is also an industry that quickly needs to digitalise its operations and can achieve this through acquisition.
Financial Services
- Financial services businesses will seek out acquisitions to harness better technology, digitalise their operations, acquire skills and resources, and expand abroad, in order to drive efficiencies and growth.
- Fintechs will be on the hunt for suitable AI-target businesses.
Retail and Consumer
We anticipate that there will be activity in the retail and consumer sector particularly in the context of consolidation deals, distressed asset sales and group reorganisations.
Life Sciences and Healthcare
Experts are predicting continued growth in life sciences and healthcare deals in 2024.
- A number of larger pharma companies have patents expiring in the short term. They may look to M&A of smaller biotech firms to plug to loss in revenue.
- Targets that provide innovative solutions for telemedicine, work with the digitalisation of healthcare data or use AI for medical diagnostics are expected to be in demand.
- Technology sub-sectors such as biotech and medtech will attract acquirers and investors this year. Medtech in particular is becoming more desirable as care providers look to create value and reduce costs.
- There is cautious optimism that IPOs will regain their appeal as an exit route for companies in the sector.