April 10, 2024
Q1 M&A Activity
“M&A Is Expected to Pick Up in the coming year as Companies Adapt to Tougher Conditions.” This was the Wall Street Journal headline, predicting companies and investors would adjust to difficult market conditions, and M&A would thrive in the new year. The headline was written in January 2023. Instead of a resurgence, deal activity in 2023 fell another 20% after a decline of 37% the prior year. (PE dealmaking saw a decline of 35% last year).
This Time Will be Different
Many commentators and market participants now feel cautiously optimistic that 2024 will see a rebound in M&A activity. Despite ongoing market uncertainty and higher interest rates, this seems to be the case so far in 2024. According to the WSJ Private Equity and Dealogic, overall value of U.S. private-equity exits totaled about $62.77 billion in the first quarter, about 16% higher than in the fourth quarter of 2023. Moreover, the number of exits rose in Q1 2024, with a total of 130 deals compared with 118 in Q4 2033 and 94 in Q1 2023.
Pitchbook, by contrast, paints a more cautious picture for private equity. In its Q1 2024 Breakdown, Pitchbook suggests PEGs may not participate fully in a broader M&A market recovery as private equity lose market share to corporate dealmaking in sectors like technology, energy, and healthcare. Tech deals surged in Q1 with $160.7 billion in total deal value making it the most active sector for M&A. It’s worth noting that energy sector M&A accounted for about 26% of deal activity in 2023. With oil prices elevated and energy companies hedging their bets in the energy transition by investing in capital intensive carbon capture and decarbonization efforts, we are likely to continue to see corporate energy deals throughout 2024. Already in Q1, global upstream M&A activity was up to $56 billion according to Evaluate Energy, its highest value in the past 7 years.
So, M&A may indeed be on the rebound, depending on sector.
CJMH Tax Seminar: April 23
Join us for our first tax seminar of the summer. Crawford Moorefield will present updates on Oil and Gas Taxation. For details and registration, go here.
Corporate Transparency Act Reminder
It may no longer be a recent development, but the news of the CTA bears repeating. On January 1, 2024, the Corporate Transparency Act (the “CTA”) went into effect. This new Federal law is intended to stop bad actors from using legal entities to commit crimes such as money laundering and terrorism. The CTA generally applies to privately-held U.S. entities, including corporations, LLCs, limited partnerships, as well as non-U.S. entities registered to do business with any Secretary of State office. The CTA requires certain companies (each, a “Reporting Company”) to file (a) an initial beneficial ownership information report, and (b) periodic updates in connection with a change in beneficial ownership. These reports are submitted online to the Financial Crimes Enforcement Network (“FinCEN”). Learn more about these reporting obligations both for newly formed companies and companies formed prior to 2024.
Careers
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This Insights presented by:
Douglas R. McCullough, Partner, Crady Jewett McCulley & Houren, LLP – [email protected]