The Los Angeles Times and its affiliate LA Times Studios recently reported an uptick in CFO sentiment during the first quarter of 2024, revealing cautious optimism that a rebound in mergers and acquisitions (M&A) is imminent. Both corporate and private equity finance professionals forecast an increase in deal volume and deal values throughout the year.
Strong financial results and easing macroeconomic headwinds are major drivers. Close to 75% of U.S. corporate leaders intend to pursue at least one deal in 2024, with nearly half targeting transactions valued over $1 billion. Private equity players are returning to the market, fueled by record “dry powder” deposits—$2.1 trillion in global reserves—ready to be deployed.
According to EY-Parthenon, overall corporate M&A volume is projected to grow by 20% in 2024, with private equity volumes up 16%, signaling a return to levels near pre-pandemic norms. Deal multiples remain attractive, and CFOs attribute a narrowing valuation gap to improved leveraging conditions and cooling inflation.
An important catalyst in this anticipated rebound is technology. CFOs and corporate leaders expect AI to transform due diligence processes, enhance deal sourcing, and improve post-merger integration timing. The LA Times also notes that a large majority of finance teams plan to adopt AI tools internally by 2026.
Despite this optimism, CFOs remain vigilant. They foresee potential pressure on EBITDA margins over time and continue to rely on Federal Reserve stress-test templates—especially those from CCAR—to guide capital planning frameworks. The Fed’s scenarios, released in mid-February 2024, anticipate possible declines in GDP, equity prices, and corporate bond yields—all factors that could influence deal financing.
Industry-specific trends vary. In the technology, media, and telecom (TMT) sectors, deal activity was restrained in Q1, with volume down nearly 2.4%, though a few high-value deals helped stabilize aggregate value. Other sectors—including energy, healthcare, and financial services—are showing stronger deal momentum.
Overall, CFOs are expressing greater confidence: surveys from Deloitte and CFO.com show more than 80% of CFOs expect deal counts and average deal sizes to increase in 2024. This sentiment reflects a broader shift from the retreat of 2023 toward a more active financial outlook this year.
To capitalize on this momentum, CEOs and CFOs should start now by identifying strategic acquisition targets aligned to digital transformation, AI, and core business strengths. Embedding AI in M&A workflows—particularly in sourcing and due diligence—can reduce transaction timelines and improve risk detection. Stress-testing earnings models under varied scenarios—especially using Fed-like templates—ensures EBITDA resilience during integration phases. Preparing for margin compression through cost efficiency and proactive debt forecasting will also help finance teams remain competitive as deal activity accelerates.
