Mega deals comeback, but where is the mid-market?

A broadly positive sentiment has characterised M&A and capital markets so far in 2024, but the aggregate global figures hide polarisation. The US, and to some extent EMEA, has enjoyed the growth, while Asia-Pacific has retreated on most fronts. Meanwhile, mega deals, which account for less than 1% of deals, have boosted values, while mid-market deals plummet. Even private equity investors are vacating an increasingly hollowed mid-market. A record year for investment-grade debt only confirms the preference for size and quality. LSEG’s Deals Intelligence experts, Matthew Toole and Lucille Jones, investigate. 

• Global M&A hits $2.3trn to end-Q3, led by US mega deals
• But sub-$500m deals fall 8% as deal count shrinks  to 8-year low
• ECM/DCM gains, with investment-grade debt hitting $4.1trn record

Global M&A has risen 16% by value in the first nine months of this year, to reach $2.3trn. The recovery follows two consecutive years of declines since the market peak of 2021. Entering the fourth quarter, the direction of travel remains positive, with the value of M&A in Q3 up 14% from the previous quarter, to surpass the $800bn mark – the first three-month period to do so in nine straight quarters. 

While the momentum is positive, the market remains top-heavy, with deals with ticket-sizes of $10bn and more dominating the market. The aggregate value of such mega deals has increased by 34% so far this year.

By contrast, smaller deals of below $500m fell by 8%, the third consecutive year-on-year decline and with a 20% decline in the number of deal announcements. As a result, the total number of deals has run counter to the rising deal values, with announcements falling by a fifth year-on-year, to touch an eight-year low of 35,857 transactions. This mid-market retreat has affected all industrial sectors, with technology seeing the biggest fall, down 31% compared to the same period last year. 

By contrast, from an aggregate value perspective, technology was up 29%, to tie with Energy & Power for 16% M&A market-share. Financials was the third largest sector, with large deals driving value up 33% to total $305bn.

The trend towards larger deals is even true for private equity activity, which was up 40% by value to reach $548bn (to account for 24% of total M&A) but that at the same time has declined by number of deals by 38%, as private equity’s mid-market hinterland feels the cold from a prolonged fundraising winter that has seen many mid-market firms failed to raise over the past year. The number of private equity mid-market deals are currently running at less than half the level of their peak in early 2023.

The global recovery also masks significant regional variations, with the US continuing to drive the market. US M&A saw an 18% increase compared to the same period last year, to reach $1.1trn, accounting for almost half of the world-wide market. Indeed, the largest ten deals were an all-US affair, with the exception of the largest – the jumbo $58bn ‘friendly offer’ by Canada’s Alimentation Couch-Tard, the owner of Circle-K, for Japan’s 7-Eleven operator. 

Meanwhile European M&A broke its recent downward trajectory to bounce back by 30% to a two-year high of $481bn. By contrast, Asia-Pacific deals declined by 8% to $415bn, the slowest nine-month period for the region since 2013.

In the M&A advisory league tables, Goldman Sachs maintained its poll position, while Morgan Stanley bumped JP Morgan into third place. 

A more modest resurgence in equity capital markets has seen global issuance levels rise 8% in the first nine months of the year to reach $445bn, the best performance for several years, although remaining significantly down on the Covid boom era. Similar to M&A markets, equity issuance was top-end loaded, with the number of offerings falling 3% to less than 3,500. 

Again, regional differences were significant, with EMEA proceeds up by a quarter to $113bn, US proceeds up 47% to take 35% of the global market, while China ECM fell 62%. China’s IPO performance, down 81% on the year, also dampened global figures for stock-market flotations. By contrast, US stock exchange IPOs saw a renaissance, up 45% to raise $26bn from initial public offerings.

The market for convertibles was up a modest 5% to reach a three-year high of $79bn in the first nine months of the year, while follow-on equity offerings grew by a healthy 20% on the year, to reach $295bn from 2,400 issuances, a 4% increase by number.

In the league tables for managing underwriter, JP Morgan took the place as most active bookrunner for the first nine months of 2024, breaking Goldman Sachs’ three-year streak in top place. 

Global debt markets have risen 18% to the end of September, to reach $8.3trn, and the number of offerings also rose 9% to reach almost 25,000 offerings, an all-time record. The growth is broad-based, with all industry sectors enjoying year-on-year gains, led by double-digit growth from healthcare, media & entertainment and retail issuers.

The debt market’s trajectory remains positive, with the third quarter up 5% on Q2, making it the third strongest Q3 since records began in 1980.

Investment grade debt accounted for almost half the market, raising $4.1trn, an increase of 19% compared to the same period last year and the highest total since records began. The momentum of the market also remains positive, with the third quarter investment-grade issuance up 9%, to rank as the fourth largest three-month period on record.

Green bonds have also enjoyed a record year saw far, totalling $381bn, up 8% from the same period last year, according to data from LSEG and the Climate Bonds Initiative. Meanwhile, high-yield issuance bounced back 86% following several quiet years, to raise $321bn, but late summer saw the steam come off the market, with a 19% quarter-on-quarter decline in Q3. 

JP Morgan continued a seven-year streak as the leading managing underwriter by global debt proceeds, followed by Citi and BofA Securities.