DLA Piper report highlights 2024 global M&A trends & insights

DLA Piper has launched its 2024 Global M&A Intelligence Report, presenting data trends and insights from over 5,500 private M&A deals worldwide. This report offers vital information for corporate leaders and industry professionals grappling with the changing M&A landscape.

In New Zealand, the M&A market has undergone notable shifts. According to Reuben Woods, DLA Piper corporate partner, "We have seen a shift in deal processes and terms reflecting the change in parties' respective bargaining strength. Buyers have often been dictating terms, insisting on bilateral, exclusive negotiations and taking their time on due diligence. The old maxim of 'time kills deals' has certainly been proven over this cycle, with many deals falling over." He added that there has been an increase in business and asset deals, and buyers are increasingly insisting on earnouts to bridge valuation gaps. "On some deals we've seen extreme earnouts, for example, 80% of the purchase price pushed into earnouts," Woods noted.

The report uncovers several key findings. It highlights the evolving role of artificial intelligence (AI) in M&A transactions, particularly in due diligence, contract drafting, negotiation, and post-merger integration. The influence of Environmental, Social, and Governance (ESG) factors is also expanding, affecting deal identification, promotional materials, and due diligence processes, including the assessment of greenwashing risks.

Another significant trend identified is the growing use of Warranty and Indemnity (W&I) insurance, which has become a global norm. The availability of W&I insurance products has expanded to more jurisdictions, with an increase in product types and improved policy terms. The insurance is being utilised more sophisticatedly, especially in auction processes and take-private transactions.

The report also emphasises sector hotspots in New Zealand, with financial services and technology, including IT professional services, remaining the most active sectors for M&A activities.

On a global scale, the report finds a notable decline in both deal volume and value in 2023, with a cautious rebound expected in the latter part of 2024. The current market is characterised as a buyers' market, with buyers taking their time to conduct thorough due diligence, often leading to extended deal timelines and less deal certainty.

The integration of AI tools is reshaping M&A transactions, making due diligence, contract drafting, and compliance more efficient and strategic. The use of AI is anticipated to grow, especially in deal origination, post-merger integration, and continued innovation in contract drafting.

Additionally, ESG considerations remain pivotal in M&A decisions, impacting valuations, diligence, and buyer protections. Increased regulatory scrutiny, particularly from the US and EU, is also impacting deal processes and timelines, with political shifts influencing regulatory approaches to foreign direct investment and merger controls.

Benjamin Parameswaran, Global Co-Chair of Corporate at DLA Piper, remarked, "The upcoming 12 months offer reasons for optimism. The uncertainty caused by the convergence of electoral cycles in many major western democracies will be over, and interest rates and inflation seem to be falling globally." He added, "The nature of the deals being done is changing, with innovations largely driven by technology and AI altering the transaction landscape."

Kathleen Ruhland, also a Global Co-Chair of Corporate at DLA Piper, stated, "Our Global M&A Intelligence Report is significant because we do more deals on a global scale than any other law firm, allowing us to analyse data from our transactions. Our unique and market-leading database provides us with a pulse on important terms and conditions in deals being negotiated every day across the world, giving us an edge in the insights and legal solutions we provide our clients."

Local corporate partners from DLA Piper New Zealand, including Pavanie Edirisuriya, Rachel Taylor, Martin Thomson, Mark Williamson, Martin Wiseman, and Reuben Woods, will share their perspectives on the report's themes over the coming weeks, offering further insights into the outlook for New Zealand's M&A landscape.