Global and Italian M&A trends 2023 and 2024 Outlook

Key highlight

As we enter a new phase for dealmaking in 2024, successful dealmakers should look forward, not back.

2023 was the worst bear market in a decade, with -6% deal volumes at global level and -10% considering completed deals only. Italy M&A activity was 3% below last year, thanks to a higher share of mid market deals and domestic transactions. The decline in volumes was much higher for a drop in large tickets.
A cautious optimism on M&A recovery in 2024 is based on improving financial markets conditions and CEOs’ and investors’ confidence.
A further M&A push for financial investors comes from pent up buyers’ demand, backlog of failed sale processes for adverse market conditions or price gap, combined with the highest level of dry powder ever seen and an increasing share of private credit and hybrid instruments in private equities product portfolio.
Growing pressure for strategic transformation and greater focus on value creation among companies will create more opportunities for corporate investors’ deal activity.
Getting ready for the rebound: four essential takeaways for dealmakers
- The need for speed: transact to transform
- Where’s the talent?
- Reinventing your business model
- Being bolder

M&A activity in the World, Italy and investment trends

M&A Trends Global (Announced)

In 2023 M&A volumes and values declined by 6% and 25% compared to the prior year, following increasing interest rates and financing challenges, with the number of deals declining by 20% between the first and second half of the year as a result of increasing market uncertainties.

Megadeals—transactions with a value in excess of US$5bn—fell by 60% from their peak of almost 150 deals in 2021 to less than 60 in 2023.

M&A Trends Global (Completed)

The decline in completed transactions is even higher (-10% in value and -49% in volumes), as a result of a more extended period between signing and closing.

The industries more affected by the decline were Financial Services (both volumes and value), TMT and Consumer (in value).

M&A Trends Italy (Completed)

Deals completed in Italy are 3% below prior year (compared to 10% global), as a result of the lower size of companies and deals, requiring less financing, and potential for market consolidation, with M&A funded by corporates' cash flows.

Not surprisingly, the largest decline has been recorded in Financial Services.

TMT and Health industries proved to be more resilient, with a slightly increasing number of deals compared to 2022 (+2%).

Data on volumes are available for a limited number of deals in Italy, therefore not presented.

M&A Trends Italy by deal type

The share of deals backed by corporate investors is overall stable around 60%, with financial buyers at 40% from FY19. Financial investors stake would be even higher considering add-on investments of companies backed by private equities.

Distribution of investments by sector is quite similar between corporate and financial players, with a higher share of corporate investments in Financial Services only.

M&A Trends Italy by origination

Domestic deals, which represent c.65% of 2023 deals, grew by +1.8% vs 2022 and Outbound deals, accounting c.12.5% of total in 2022, increased by +3.2% vs 2022.

The decline in volumes is therefore entirely related to inbound from foreign players (both corporate and financial).

‏‏‎ ‎

Deal volume	2021	2022	2023	Chg% FY22-23
Domestic	763	825	840	1.8%
Inbound	314	358	296	17.3%
Outbound	168	158	163	3.2%
Total	1245	1341	1299	3.1%

Key M&A trends for 2024

We expect a healthier M&A market in 2024 with:

gradually decreasing interest rates from March 2024 and a normalization of inflation rates;
more stable financing environment, with an emerging role of private equities in the debt market through dedicated funds or hybrid instruments;
improved companies' fundamentals and more confidence on projections, which will compensate a decline in multiples compared to valuation peaks reached in 2021-22;
enterpreneurs' sentiment more favourable to a sale (even of a majority stake) after the troubles experienced over the last 3 years.

A quiet IPO market will generate a potential pipeline for M&A transaction and IPO candidates, in particular those backed by PE, will likely pursue a dual track approach.
We expect also delisting sponsored by private equities in consideration of limited capitalization and liquidity of certain assets listed on the Italian market.

We see opportunities for distressed M&A in specific subsectors, mainly retail and hospitality.

Financial investors

We expect increasing volumes boosted by the highest level of dry powder ($4tn) and of assets under management ($12tn, twice FY19 level) ever seen. Furthermore 2022-23 delayed / frozen processes have contributed to generate a backlog which will unfold in 2024-25. In terms of timing, we expect more plays in the second half of the year, in particular for large deals, and we see the first semester dedicated to deals preparation.

Corporate investors

Global megatrends, including digitalisation and decarbonisation, lead to major transformations. As companies look to scale, gain access to technology and talent, and accelerate growth, acquisitions are one obvious path forward. Alternatively-or additionally-divestitures of non-core or underperforming assets will allow them to focus financial and managerial resources on core strategic growth areas.