M&A, Poised to Return

You weren’t the only one waiting for all that campaigning to end.

After a noticeable and unexpected slowdown in merger and acquisition activity in the US this year, experts are predicting that the coming months will see corporate leaders jump into a slew of big deals. Certainly, the money is there: S&P 500 firms have been holding a record $3.8 trillion cash while awaiting the result of the US presidential election. “M&A thrives on certainty over ambiguity,” says Jeff Constable, co-leader of the Global Financial Officers practice at Korn Ferry.

Not knowing who would occupy the White House, many corporate leaders were concerned about where antitrust and regulatory oversight might be headed. Now, Constable says, a less restrictive environment under the incoming administration could see the return of transformational deals.

Experts say some industries are poised for more consolidation than others. Technology, energy, and life sciences are among the sectors experiencing the most activity this year. Nicson White, a senior client partner in the Life Sciences Advisory practice at Korn Ferry, says that supply-chain disruption, economies of scale, and the need for new drug therapies are driving consolidation in the sector; deal volume is up 20% in the last 12 months. “AI is accelerating drug-discovery research and clinical processes, allowing wider participation and more potential acquirees to enter the market,” says White.

Still, dealmaking isn’t necessarily the best move for some firms, as wrongheaded deals have historically reduced value for shareholders. Many lead to layoffs of key staff members that firms regret, instead of increased hiring and more innovation. Experts say leaders need to be disciplined—because firms often overpay to outbid competitors, or rush to buy a company that isn’t a great strategic fit just because they have the money to do so. “Some firms are always prone to overpaying for acquisitions,” says Constable.

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