After a tepid 2023, M&A activity is rebounding in 2024—and momentum is expected to continue in the year to come.

As the economy stabilized during 2024, overall U.S. deal value in the first five months of 2024 reached $535 billion, up almost 30% from the same period a year ago. Megadeals (i.e., deals in excess of $1 billion)—largely based in the U.S.— had their strongest start to the year since 2019. It tracks, then, that 70% of survey respondents believe the M&A market will strengthen in the next 12 months, largely driven by improved financial markets (42%) and economic conditions (36%), as well as the availability of capital (35%). The availability of quality targets (31%) and company valuations (26%) have also become increasingly important drivers when compared to last year’s outlook.

This makes sense. Stock market indices hit all-time highs in 2024. Lower interest rates are anticipated. Inflation has cooled. But there’s more to the story. Amid rapid technological development and change, business leaders know that they have to innovate or perish: a recent survey, for instance, found that 82% of U.S. CEOs say the average company in their industry will not be in business in a decade should it fail to change its current business model. M&A can help. It follows that 61% of respondents to this year’s survey say their company will be involved in an acquisition in the next 12 months.

Yet bigger players, potentially with stronger margins than their smaller and middle-market counterparts, have the resources to invest in automation and AI. Smaller organizations, however, may need to pursue acquisitions in order to spur growth and add efficiency. Our respondents, roughly equally distributed across small, middle market and capital market businesses, concur: over half (56%) say small-market deals will increase in the next year, while 50% said the same about mid-market deals; large-market and megadeals lagged behind at 43%.

Though macroeconomic conditions are improving, uncertainty—particularly around interest rates and the corresponding market response—is still very much present in today’s dealmaking environment. And as activity picks up, so too will competition for the most attractive targets. It’s no wonder that when asked about the top obstacles to M&A in the next 12 months, respondents cited general economic conditions (39%) and financial market conditions (35%), as well as buyer competition (29%), company valuations (28%), and availability of quality targets (26%).  

“Simply put, interest rates impact how much buyers will pay for a company—the lower they are, the better chance a buyer has to generate a return,” says Eric White, Member at Dykema and Assistant Practice Group Leader of the firm’s Corporate Finance Practice. “Should interest rates go down, we’ll have a larger group of potential buyers. Not just private equity players and other financial buyers, but competitors who want to consolidate now.”