Last Thursday we held our 2024 M&A Summit in London, where we were joined by over 100 market experts, corporates intermediaries and investors to discuss the global deal landscape. 

We kicked off the afternoon with a panel discussion, where our panellists outlined the main deal trends they've seen emerge in Q1 2024 and what they expect to see happening in the market for the rest of the year.

Our Co-Head of Global Corporate M&A, Emma Danks, was joined on the panel by: 

• Rob Donaldson, CEO of RSM UK. 

• Philip Bowcock, Executive Chair of Eurochange. 

• James McBride, Managing Director at Forefront Advisers.

Below we've listed some of the main discussion points from the panel.  

Uncertainty still reigns – but there's hope for H2 

After a quiet 2023, many people were expecting to see deal activity start to increase in Q1 2024, and December saw the largest number of data rooms ever opened in preparation for an expected surge in activity. But the surge hasn’t quite materialised.

The view of our panel was that given worse-than-expected inflation figures in the UK and US, delays to interest rate cuts, and fresh geopolitical challenges emerging (and existing challenges continuing, if not worsening), it's possible we won't see a significant increase in deal activity for a few months. But green shoots are emerging, and there was optimism in the room, with 59% of attendees polled indicating they thought we'd see an increase in deal volumes by the end of 2024 by comparison to the end of 2023.

The valuation gap - something's got to give

The current environment is causing uncertainty on both sides of transactions. Buyers are carefully assessing market conditions when considering acquisitions and are almost looking for a reason not to do a deal rather than a reason to. There are concerns about whether they'll get a good return on capital if they choose to deploy it.

Sellers on the other hand are perhaps being slightly naïve about their valuations. Though holding out for better market conditions to sell makes sense in some ways, some sellers are at risk of holding onto assets in the hope of a valuation improvement which may not materialise (particularly if they are pinning their hopes on 2021-equivalent valuations). In the meantime, the longer distraction and management time involved in retaining a non-core asset could outweigh the contribution which the asset makes to cash flow in the immediate term.

Private equity funds may also need to take a hard look at their books and ask if investment valuations are accurate. Some assets are now relatively aged given the hold period and valuations may be quite far off from what can be achieved in the current lower multiple environment.

Artificial intelligence – the future or fad?

Given the widespread attention artificial intelligence (AI) technologies are receiving in the wake of generative AI advances, we asked our panel for their thoughts on whether AI is the next big thing. Sentiment was mixed. There was an acknowledgement that AI has been in businesses for a number of years, and while it is important, the question is how important.

Panellist also remarked that the attention it’s currently receiving is slightly reminiscent of the dot-com boom, and companies are attempting to take advantage of the current interest by 'sprinkling' AI in investment memorandums to increase multiples.

There was a more positive attitude to generative AI amongst our audience, with 77% indicating they're already using or are likely to use generative AI in their business this year.

Political change 

The final main topic our panel covered was the upcoming UK General Election, and indeed elections around the world, and how political change might affect the market. The general consensus seemed to be that we're heading for a Labour government, and it was noted that if Labour do win the election, we’ll have the most left-wing Prime Minister and Chancellor since the 1970s – and that mainstream media was currently ignoring this fact. Therefore caution should be exercised in assuming a Labour win will mean a Blair-esque approach to policy.

AI, preparing to sell and UK vs US M&A nuances 

After a short break, attendees were given the choice of three breakout sessions covering current topical issues.

The art of an exit: strategies to think about when selling your business

This session explored the factors business owners need to think about when selling a business. Attendees were asked what their greatest concern about going through an exit process was, with 67% concerned about finding the right buyer, and 24% concerned about something being uncovered by due diligence.

Our panel then discussed common challenges they'd seen arise during sales processes and areas that business owners should pay attention to, including:

• the need to have a clear vision for why you're selling, and what you want to achieve from a sale  

• preparing your team for a sale process and ensuring you understand the amount of work that's involved 

• the importance of honesty, and being upfront about any issues you're aware of 

• why it's important to involve lawyers and advisers early on to pre-empt issues arising, ideally before a term sheet is signed.

Decoding AI: what to look out for when investing in AI

This session explored what attendees need to look out for when investing in AI. Our panel covered a lot of ground, including: 

• the need to balance entrepreneurial risk with regulatory risk 

• how AI is affecting valuations 

• legal considerations in AI-driven businesses  

• what to look out for in due diligence for AI acquisitions on the buyside  

• when anticipating a sale in the next 2-3 years of a business which uses AI, how to future-proof ready for this eventual sale.

Riding the transatlantic wave: navigating the nuances of US and UK M&A

This session explored cross-border deal dynamics between the US and UK. Topics discussed included: 

• US-style reps and warranties, and the differences compared to UK-style warranty and indemnity insurance

• management incentivisation plans

• methods of buying a company for US investors.

We've had some fantastic feedback on the event and are glad it proved useful to helping attendees get to grips with the current market conditions, as well as collaborate and make new connections and opportunities. If you'd like to discuss anything we've mentioned above in more detail, please get in touch.