M&A may have declined in 2023, but a new McKinsey report shows why CEOs still say it’s ‘a more vital strategic lever than ever’

The firm’s report released this morning, The Top M&A Trends in 2024, finds that although there was a steep decline in global mergers and acquisitions for most of 2023, activity jumped 41% in last year’s fourth quarter from the third quarter, and 37% from a year earlier.

Courtesy of McKinsey

There’s a growing appetite for strategic dealmaking. A few key factors cited by McKinsey, in relation to M&A market’s durability, include:

—”Seismic shifts” in businesses, such as the rise of AI, the importance of sustainability, and the emergence of a tech-enabled consumer class. “CEOs across industries tell us that M&A is a more vital strategic lever than ever,” according to the report.

—Organic growth never really compared to the most effective M&A strategy. And when significant strategic shifts are called for, it pales further, especially companies that need to adapt quickly.

—Although private equity investors accounted for only 18% of deal activity in 2023, they’re not likely to linger on the sidelines for long. “Some funds will need to consider exit strategies and redeployments in the near term, and others, along with corporate dealmakers, may be aroused by the more than $2 trillion in undeployed capital as of the end of 2023,” according to the report. Although macroeconomic headwinds remain a possibility, that “mountain of dry powder nonetheless beckons—a temptation.”

McKinsey’s complete global report also notes that over the past two years about 30% of the 50 largest global acquisitions (by deal size) experienced delays beyond their control—up from 15% in 2020.

The firm offers the “4Rs” for managing M&A delays: 

—Reflect: Assess all delay scenarios, develop contingency plans as in building the integration timeline.
—Revise: Pivot to actions to limit downside, and find potential upside.
—Reframe: Craft the narrative and communicate it clearly.
—Reinvigorate: Engage people to sustain momentum.

To find out more, you can access the report here.

Sheryl Estrada
[email protected]

Leaderboard

Brian Paplaski was named CFO at Dynamic Renewables, an owner and operator of waste management and renewable fuel projects. Paplaski, who began in the role on Feb. 5, most recently was CFO at Certasite, and was previously CFO at Kinetrex Energy, which was acquired by Kinder Morgan in 2021.

Han Wang was named CFO at Zhihu Inc. (NYSE: ZH), an online content community, effective immediately. Henry Dachuan Sha resigned as a director and the CFO and was appointed as the chief investment officer of the company. Before joining the company, Wang had a leadership role at Access Technology Ventures, a global investment platform under Access Industries, Inc., He also served as vice president at Hillhouse Capital, and a director at Legend Capital. 

Big deal

Most entry-level employees in financial services are lacking "desk readiness," according to The Wall Street Prep State of L&D in Financial Services survey. The findings are based on a global survey of 260 HR and learning and development (L&D) executives working in financial services for global banks, boutiques, private equity firms, alternative asset managers, and sovereign wealth funds. 

Seventy percent of participants cited improving desk readiness as a top priority, while 63% had a focus on greater alignment with business needs. Over 76% of respondents said in-person training is now the preferred execution method. Although the majority (77%) of companies report that most incoming full-time analysts are returning interns, most intern programs are limited and not connected to the full-time experience, according to the report.

"Despite massive investments in training programs, the harsh reality is that many juniors show up at the desk on day one completely unprepared and require significant hand-holding from the business to be productive," Alex Gorbansky, managing director of corporate training at Wall Street Prep, said in a statement. 

Going deeper

Diligent has released its Shareholder Activism Annual Review 2024, produced in association with Olshan Frome Wolosky. The report highlights the impact that activist shareholders make and dives into the general feelings of board members and how many incidents are impacting boards across the globe. 

Overheard

"Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies."

—Richard Fairbank, founder, chairman and CEO of Capital One, said in a statement on Monday about the company acquiring Discover in an all-stock transaction valued at $35.3 billion.