A 2024 Turnaround?

The uncertain and unfavourable market conditions of 2023 created an environment that hindered the growth of M&A volume and value. Across various industries, factors such as uncertainty surrounding macroeconomic conditions, heightened geopolitical conflict, and a challenging debt landscape contributed to lower market activity compared to 2022.

However, there is optimism for a reversal of the 2023 lows in 2024. The slowing inflation growth (despite an uptick in December in the UK; January figures to be posted this week) and the expected subsequent decrease in the cost of long-term borrowing suggest we will see an upswing in deal volumes.

Despite this positive outlook, some investors remain cautious. Ongoing lower interest rate-fuelled rallies may be unsustainable, and concerns continue about persistent inflation leading to widespread market reversals. However, the IPO market is anticipated to undergo positive changes in 2024, contrasting with 2023 when equity capital markets awaited more favourable conditions to safeguard valuations.

Another factor influencing public market growth in 2024 is the multitude of upcoming general elections. Cautious investors will consider the potential for policy changes under new leadership to impact global markets.

In the UK, private equity activity is poised to dominate the 2024 markets, with public-to-private deals expected to be a prevalent theme. Undervalued companies may seek new ownership in the hopes of igniting growth and achieving higher longer-term valuations.

Confidence and consumer sentiment are projected to improve in 2024, with trophy assets in high-growth industries continuing to steer the market. Sectors such as AI, deep-tech, cybersecurity, and software are expected to maintain their trajectories. Investors are likely to channel capital towards companies within these sectors as well as companies with strong fundamentals, such as robust recurring revenues and profitability. This trend will likely drive M&A and equity capital transactions across public and private markets.