Even in the face of recessionary headwinds, consumer spending in the food and beverage sector has been robust throughout 2023. Much of this is driven by travel and leisure, an industry that tends to go hand-in-hand. Many companies in the space have been treading lightly around M&A dealmaking during 2023, but as recessionary fears subside, we expect them to give in to the pent-up demand for growth through M&A. At the same time however, inflationary pressure on both supply and labor costs have cut into profits in the food service space, which could soften the valuations of these businesses as we head into 2024, thereby spurring increased deal activity, or even lead to some distressed company sales.

Activity level: Full steam ahead

Increasingly, companies are turning to AI to enhance their services, software applications, and integrations, leading to a parallel rise in cybersecurity issues and risks. As the adoption of AI technologies accelerates, new challenges will emerge in M&A discussions, including complex negotiations around data usage and protection, as well as risk allocation. These topics are now frequently featured in representations and warranties, indemnities, and limitations of liability clauses between the parties to the transaction. Though these challenges may slow activity in some sectors, expect the financial services sector to plow ahead, continuing its investments in cybersecurity measures to meet consumer and regulatory demands, while placing an intense focus on investing in AI to better analyze customer data.

Activity level: Balanced growth

As the transition into electrification and advanced mobility continues to accelerate, expect to see an increase in spinoffs and separation of electrification and advanced portions of manufacturing businesses from other sectors of operation. In addition, we anticipate a growing number of financially distressed suppliers look to exit their businesses through sale processes—though these processes can be complicated due to their lack of diversification into advanced mobility. This calls for specialized knowledge of the industry to understand whether and how the selling entity can be competitive and whether a sale can be accomplished and maintain success

Activity level: Balanced growth

Coalescing factors will drive an uptick in M&A activity in the financial services sector next year. First, recent pressures on the banking system and the continued availability of private equity dry powder will result in historically low valuations (particularly in FinTech). There is also an intense focus on investing in talent and technologies in digital banking and cloud technologies, and facilitating due diligence in financial transactions and M&A transactions. Finally, expect an uptick in companies acquiring or expanding fee-generating businesses to diversify their revenue streams. Due in part to three regional bank failures, US regulators may lower the threshold at which banks are subject to stricter regulatory requirements, like higher capital levels and more onerous stress testing. Banks at or near the new threshold could use M&A to either grow and disseminate the added compliance costs over a larger operation, or divest to remain beneath the threshold.

Activity level: Full steam ahead

As a sector comprised of a few giant conglomerates and several small companies and start-ups, expect consolidation in aerospace to accelerate as these smaller firms recognize the need to scale up to stay competitive. Given the number of eVTOL (electric vertical take-off and landing) companies recently going public, we anticipate continued interest and activity around this segment—don’t be surprised if 2024 brings some consolidation as the technology winners become more apparent. Speaking of technology, expect the commercial drone sector to expand rapidly, as regulations around them become more clear, and companies roll out better software to support increased drone utilization in commercial applications.

Activity level: Warming up

As we close out 2023, M&A activity in the energy industry continues to gain momentum. Across the power and renewables sectors, a focus on energy transition policies, as well as energy supply and security, continues to drive deals. M&A activity in the oil and gas industry remains busy, with several notable deals in recent months, indicating a continued consolidation in the industry focused on achieving lower costs and creating free cash flow. ESG efforts remain top of mind to investors and stakeholders across the board, and we anticipate these efforts will continue to drive deals across the energy industry as a whole. Despite the challenges created by inflation, cost of capital, and continued supply issues, M&A activity in the energy industry is steadily increasing as we look forward to 2024.

Activity level: Warming up

Even in the face of recessionary headwinds, consumer spending in the food and beverage sector has been robust throughout 2023. Much of this is driven by travel and leisure, an industry that tends to go hand-in-hand. Many companies in the space have been treading lightly around M&A dealmaking during 2023, but as recessionary fears subside, we expect them to give in to the pent-up demand for growth through M&A. At the same time however, inflationary pressure on both supply and labor costs have cut into profits in the food service space, which could soften the valuations of these businesses as we head into 2024, thereby spurring increased deal activity, or even lead to some distressed company sales.

Activity level: Full steam ahead