U.S. M&A Market Heats Up Across All Levels in Q3 2024

The U.S. mergers and acquisitions (M&A) market witnessed a robust resurgence in Q3 2024, with activity surging across all levels, from Main Street to the mega-deal arena. A confluence of factors, including easing inflation, improved credit conditions, and strong equity markets, fueled this renewed confidence in the economy and business prospects.

Mega-Deals Drive Overall Value

“The M&A recovery is now hitting its stride,” declares PitchBook's Q3 2024 Global M&A Report.¹ Total deal value in the first three quarters of the year exceeded $1.5 trillion – a 27.6% jump year-over-year. The number of deals announced or closed between Q1 and Q3 2024 reached 13,509, a 13.3% growth year-over-year.

Several megadeals contributed significantly to this surge. The top 10 deals in North America in Q3 2024 had a combined value of $111.6 billion, a 6% increase year-over-year.² Notable transactions included Mars Inc.’s acquisition of Kellanova and Verizon Communications Inc.’s purchase of Frontier Communications Parent Inc.³

Private Equity Makes a Comeback

After a period of relative quiet, private equity (PE) firms stormed back into the M&A arena. “PE firms are now benefiting from a ‘stealth' rate-cut cycle, and big banks have returned to the deal lending market,” explains the PitchBook report.¹ This renewed access to capital fueled PE's share of M&A deal value to climb to 41.2% year-to-date.

Main Street Shows Resilience

Main Street, representing the smallest end of the M&A spectrum, also demonstrated a healthy appetite for dealmaking. BizBuySell's Q3 2024 Insight Report revealed a 20% year-over-year increase in the total enterprise value of businesses sold, reaching $2 billion.¹⁰

“This is the first year in which confidence rose among both buyers and sellers simultaneously,” according to the BizBuySell report.¹⁰ Most business owners (54%) feel confident they would receive an acceptable sale price today, with 43% expecting even greater prices in 2025.

This optimism is driven by several factors, including:

• Stronger Financials: Businesses that sold in Q3 reported median revenue up 8% annually and median cash flow up 3.5% annually.¹⁰
• Favorable Financing: Lower interest rates are increasing purchasing power for buyers and enabling sellers to command higher valuations.
• Sector Strength: Service businesses (39%), restaurants (21%), and retail (20%) led the way in terms of transaction volume.¹⁰

Middle Market Holds Steady

The middle market demonstrated resilience in Q3 2024, with GF Data reporting steady deal volume and firm valuations.⁹ PE firms continued to be active in this segment, providing capital and driving deal flow.

Key Trends and Takeaways

• Confidence Across the Board: The robust activity across all levels of the M&A market reflects a widespread belief in the strength of the US economy and the long-term prospects of businesses of all sizes.
• Favorable Financing Environment: Easing credit conditions and increased bank lending have made it easier for companies to access capital for acquisitions.
• Strategic Acquisitions: Companies are increasingly using M&A strategically to expand market share, acquire new technologies, or diversify offerings.

Looking Ahead

While the current momentum suggests a positive outlook for the US M&A market, challenges remain, including geopolitical uncertainties and the potential for renewed economic volatility.

“It’s important to remember that M&A activity can be influenced by a variety of factors, and market conditions can change rapidly,” cautions S&P Global Market Intelligence.⁵ Nevertheless, the current trends indicate that the U.S. M&A market is poised for continued growth and transformation through 2025.

The Bottom Line

While uncertainties remain, the M&A market in 2024 is experiencing a resurgence of optimism, with dealmakers increasingly looking to transformational deals and innovative technologies to shape the future. With the majority of both private equity firms and corporates expecting continued growth in 2025, the landscape appears poised for a period of heightened activity.

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Sources:

[1] PitchBook's Q3 2024 Global M&A Report:

https://pitchbook.com/news/reports/q3-2024-global-ma-report 

[2] Foley & Lardner LLP: https://www.foley.com/insights/publications/2024/11/ma-market-picking-up-steam-q3-activity/ 

[3] S&P Global Market Intelligence: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/m-a-activity-in-the-us-and-canada-falls-in-q3-as-deal-value-rises-85741632 

[4] Kaufman Hall: https://www.kaufmanhall.com/insights/research-report/ma-quarterly-activity-report-q3-2024 

[5] S&P Global Market Intelligence: https://www.spglobal.com/market-intelligence/en/news-insights/research/global-m-a-by-the-numbers-q3-2024 

[6] Main Street Announces Third Quarter 2024 Private Loan Portfolio Activity: https://www.mainstcapital.com/investors/news-events/press-releases/detail/2699/main-street-announces-third-quarter-2024-private-loan 

[7] Main Street Capital's Q3 Earnings Miss, Expenses Increase Y/Y - Nasdaq: https://www.nasdaq.com/articles/main-street-capitals-q3-earnings-miss-expenses-increase-y-y [8] Main Street Announces Preliminary Estimate of Third Quarter 2024 Operating Results: https://www.stocktitan.net/news/MAIN/main-street-announces-preliminary-estimate-of-third-quarter-2024-v064eki46xno.html 

[9] GF Data: https://gfdata.com/ 

[10] BizBuySell's Q3 2024 Insight Report: https://www.bizbuysell.com/insight-report/