The ABC's of Private Equity M&A: Deal Flow Impacts of Al, Big Tech and Climate Change

Mergers and Acquisitions

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The ABC's of Private Equity Mergers and Acquisitions: Deal Flow Impacts of Al, Big Tech and Climate Change
M&A and Transaction Solutions

The ABC's of Private Equity M&A

The global mergers and acquisitions market has hit the ground running so far this year, despite the persistent challenges posed by uncomfortably high interest rates and one of the most difficult geopolitical climates in recent memory.

This report examines the current M&A landscape, focusing on the unique perspectives and strategies employed by private equity firms and corporates. While both groups are keen to capitalize on opportunities presented by the market, they have unique objectives and face distinct challenges when making investment decisions.

The report also explores the exit strategies employed by strategics and sponsors, highlighting the growing popularity of alternative routes such as continuation funds and other secondary transactions that have served as a critical liquidity lifeline in a notably slower exit environment.

In a complex M&A landscape, it is only the most adaptive executives who will be able to respond to today’s myriad opportunities and challenges and thus create lasting value in their deals.

Key Findings

  • A Brighter Future

    Dealmakers are optimistic about the next 12 months, with 64% of respondents expecting M&A activity to increase. This is likely to be driven by improving market conditions and capital availability, despite ongoing challenges presented by today's elevated interest rate conditions.

  • Tighter Rules

    Regulatory frameworks are the top focus for 28% of respondents when evaluating potential deals, with the latest US Merger Guidelines signalling a shift towards more stringent antitrust enforcement and sustainability-related regulations such as the EU's Corporate Sustainability Reporting Directive and forthcoming Corporate Sustainability Due Diligence Directive ratcheting up.

  • IT and ESG in the Spotlight

    Information technology and environmental and climate risk due diligence have become the most critical areas when evaluating transactions over the past year. More than half (52%) of respondents selected each as crucial for identifying potential liabilities and value creation opportunities, forcing dealmakers to adapt their risk assessments.

  • Clean Breaks

    Sales to corporate buyers are expected to be the most dominant exit routes in the next 12 months (44% of respondents), as investors seek clean breaks from their assets and strategic premiums to maximize value. This is followed by continuation funds and secondary transactions (32%), which provide critical liquidity alternatives to PE investors amid a slower exit environment.

  • Artificial Intelligence Gets Real

    Al is a key focus for private equity firms, with 76% indicating that technology and Al-enabled acquisitions will significantly influence their buy-side strategies, while 48% prioritize add-on transactions to strengthen existing investments and achieve synergies.

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