New focus on Artificial Intelligence should boost negotiations next year
O Gartner, a world leader in research and advice for companies, presents the main trends in Mergers and Acquisitions (M&A) for 2024. They include unlocking business opportunities involving technology amid macroeconomic ambiguity; use Artificial Intelligence (AI) to improve Mergers and Acquisitions processes; acquire businesses based on Artificial Intelligence; and navigate an increasingly complex regulatory environment.
Mark Carroll, Vice President and Analyst at Gartner
“Global M&A activity continues its downward march from record levels in 2021, with a decline of 50% from the peak moment,” it states Mark Carroll, Vice President and Analyst at Gartner. “Macroeconomic and regulatory challenges reinforce this trend, but a renewed focus on technology, especially Artificial Intelligence (AI), offers tailwinds for executives to significantly re-enter the M&A market next year,” he says.
Chris Ganly, Vice President and Team Manager, Gartner
“Mergers and Acquisitions remain a growth engine for most companies. Therefore, success next year will increasingly depend on how executives will deal with these market trends”, he states. Chris Ganly, Vice President and Team Manager at Gartner. “Achieving success with M&A will mean positioning companies for market leadership for many years to come.”
For Gartner, the main M&A trends are:
Trend 1: Macroeconomic Ambiguity Unlocks Opportunities in M&A Technology: According to Gartner, macroeconomic ambiguity will persist in 2024, with mixed signals, from positive to negative, distorting expectations about inflation, recession, employment, cost of capital, business and consumer confidence. Technology companies startups previously expensive ones will have difficulty raising their next round of venture financing and will seek alternatives, including being acquired by strategic buyers. Gartner recommends that well-capitalized companies take advantage of the moment by seeking acquisitions of smaller, technology-focused companies (techquisitions) and with lower valuations, therefore having less access to financing and clearer economic conditions.
Trend 2: Use of Artificial Intelligence Will Improve the Mergers and Acquisitions Process: Gartner states that the use of Artificial Intelligence will have a profound impact on improving the speed, efficiency and overall performance of M&A processes. However, the details of how or where the technology will be used are emerging to identify what is practical now versus the long-term possibilities. Gartner recommends applying Artificial Intelligence first within internal M&A processes, developing and testing different use cases. In particular, contract analytics is an impactful application for using Artificial Intelligence and improving activities related to letter of intent (LOI) negotiations, contract due diligence, definitive agreements,
Trend 3: Artificial Intelligence Strategy Will Require New Approaches to Acquiring Technology-Based Companies: Although Mergers and Acquisitions of companies based on Intelligenceartificial are not yet a trend for many companies, Gartner highlights that the enterprise focus on this technology will lead to a wave of business activity in 2024. According to Research Gartner CEOs in 2023, Artificial Intelligence was identified as the main disruptive technology to impact industries. Gartner recommends that acquiring AI companies be a priority in all business strategies in 2024. Those who don't have the skills or time horizon to build capabilities on their own can turn to M&A to gain quick access to technology.
Trend 4: Increased Regulatory Oversight Will Hinder Major M&A Activity: Regulatory oversight of M&A deals, especially for anti-competitive and national security reasons, is increasing and will continue to be an important factor, potentially hindering large deals in 2024, according to Gartner. However, this trend should encourage many smaller, more diverse M&A deals in the industry, which could create a competitive advantage. “Stricter regulatory oversight, which can have a chilling effect on large M&A transactions, can also create a competitive opportunity for better positioned companies and a greater volume of smaller deals,” says Ganly. “For those focused on larger deals, it is important to take a more proactive approach with regulators in the coming year.”
Gartner customers can read more in the survey “Top Trends in M&A for 2024.”
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