The Return of M&A?

It wasn’t just you who were 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 corporate leaders will jump into a slew of big deals in the coming months. Certainly, they have the funds, with S&P 500 firms holding record $3.8 trillion cash as they waited for the uncertainly around the US Presidential election to lift. “M&A thrives on certainty over ambiguity,” says Jeff Constable, co-leader of the global financial officers practice at Korn Ferry.

Along with not knowing who will sit in the White House, many corporate leaders were concerned about where antitrust and regulatory oversight were 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. So far this year, technology, energy, and life sciences are among the sectors experiencing the most activity. Nicson White, a senior client partner in the life sciences practice at Korn Ferry, says the need for new drug therapies, supply chain disruption, and economies of scale 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 alone isn’t necessarily the best move for some firms, as wrong deals lead to more layoffs instead of more hiring. Experts say leaders need to be disciplined and not get pressured into overspending or over-acquiring. History has shown that most deals don’t create value for shareholders, in part because leaders fall prey to paying too much to outbid a competitor, for instance, 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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