M&A decision-makers are optimistic overall about prospects for deals for the rest of this year and 2025. But the greatest enthusiasm comes from private equity executives, rather than their corporate counterparts.
Well more than half (60%) of 50 deal professionals at PE funds, surveyed by KPMG in June, said that in 2025 they expect to be involved in at least one large, transformative transaction. The survey report defined such deals as ones that “change the very nature and operations of a company.”
By comparison, only about half that proportion (33%) of the 150 surveyed corporate dealmakers (all with annual revenue of at least $1 billion) foresaw doing a large transformative deal next year.
Furthermore, 70% of the 50 PE respondents (all with fund sizes of at least $1 billion) said they anticipate doing more transactions in 2024 than in 2023, and 84% expect that total to rise again next year. The corporate participants were far less hopeful, with corresponding results of 31% and 33%, respectively.
Put simply, at present private equity funds have money to burn.
“PE firms are sitting on record amounts of dry powder that they will need to deploy,” said Glenn Mincey, U.S. head of private equity at KPMG. “But perhaps more importantly, PE firms have held a surplus of assets for longer than they anticipated, and many will need to sell those assets soon to fund returns to their investors.”
And if they don’t sell soon, he added, they risk facing an unfavorable forced-sale environment.
The two groups of respondents did, though, have similar views on the expected timeline for their next deal. Among all 200 of those polled, 57% said they expect that to happen this year, and 41% pointed to 2025.
Expressing her optimism about the deal market into next year, Carole Streicher, head of deal advisory and strategy for KPMG US, noted, “We’ve already seen dealmakers get comfortable with the ‘new normal’ of elevated interest rates and consistent uncertainty. But when that new normal tips more to the positive, there’s a potential for activity to take off.”
Indeed, two-thirds of dealmakers (64%) said a rate decrease of either 0.25% or 0.5% would drive their deal volume to a level consistent with prior peak periods for M&A. That broke down into 25% saying the quarter-point rate cut would accomplish that result, and 39% saying the half-point decrease would do the trick.
At present elevated rates and rate uncertainty are the biggest perceived hurdles for future deals, KPMG said, with overall concern about these issues having dropped from last year.
Some other survey results:
- Two in three dealmakers indicated that geopolitical issues have affected their M&A plans, and a majority of those said geopolitics has increased or brought forward those plans.
- Most (79%) of dealmakers indicated that GenAI has had some impact on their deals.