We have all been waiting, some of us not very patiently, for a recovery in M&A activity, and Q2 2024 data is showing some green shoots of optimism. PitchBook has released its Global M&A Report for Q2 of this year, and there is some positive news: global M&A activity is ahead of 2023 by 10 to 15% in deal count and value.

PitchBook analysts point to a “mild recovery” in Q1 of this year, followed by a stronger recovery in Q2 when PE-related deal flow began to pick up. Q1 was driven mainly by corporate acquirers and strategic deals, while PE still held back amid higher interest rates. However, in Q2, PE jumped in, with their share of total M&A volume rebounding to 41% (up from 33.5% in Q1).  Their analysts note that PE had previously accounted for 44.3% of deal flow, but that number had dropped significantly because of their reliance on debt.

This is on track with expectations that 2024 will be a recovery year. PitchBook notes that banks are now re-entering the market and competing with nonbank lenders that have been filling the void. This competition has led to lower rates for dealmakers despite interest rates remaining higher overall. With rate cuts from the Fed potentially on the horizon, that could spur an even larger rebound.

So, besides a significant cut in rates, what else is needed for a more robust recovery? According to PitchBook, the market needs to see a boost in the asset values of private companies to sustain a recovery. When those values rebound, we could see more of the recovery we have all been waiting for.

Regarding geography, the first half of 2024 saw cross-border deal flow somewhat even between Europe and North America. This contrasts with a seven-year period when it was much more in favor of Europe. North American M&A activity with a non-North American acquirer was valued at $138.4 billion in H1 across 590 deals. European deal activity with a non-European acquirer was valued at $114.4 billion across 738 deals.  PitchBook says this pivot is due to a “combination of better growth at home and less purchasing power abroad.”

While we do not yet know what the rest of the year holds, if this positive momentum can be coupled with interest rate cuts, we could be in store for the kind of recovery we anticipate. Especially if we start to see an uptick in the valuations of private companies, which PitchBook feels could be the key. Everyone in the dealmaking world will watch closely to see what the Fed decides and how that will play out in the coming months. Stay tuned.