Rebound in M&A activity expected in 2024

The early signs for a rebound in global M&A activity in 2024 are promising and demand for representations & warranties (R&W)/warranty & indemnity (W&I) insurance is likely to intensify over the next 12 months, according to Norton Rose Fulbright. The law firm’s Global M&A trends and risks 2024 report says that consolidation and digital transformation is expected to propel global M&A activity despite the rising regulatory burden. “With inflation easing, the year ahead is likely to see action by central banks to cut lending rates, a move that will be welcomed by dealmakers everywhere – particularly those struggling to navigate stubborn valuation gaps…Our findings indicate that dealmakers are broadly optimistic, with more than half expecting their deal appetite to increase over the next 12 months,” says Norton Rose Fulbright. As for R&W/W&I insurance, the survey shows that an average of 61% of respondents expect the use of R&W/W&I insurance to increase somewhat or increase significantly around the world. However, the law firm notes that there is a notable divide between emerging and advanced markets. East Asia, South & Southeast Asia and Africa are poised for the greatest growth, with all three regions expected to see notable increases in R&W/W&I uptake in 2024 compared to 2023, with 47% of respondents in South & Southeast Asia expecting to see a significant increase in 2024. The Middle East and Latin America are also expected to see notable increases. Among developed economies, Europe stands out as the region where the increase in the use of R&W/W&I insurance is expected to be the greatest, the survey reveals. By contrast, far smaller shares of respondents expect to see noteworthy upticks in Australia & New Zealand, Canada, or the US. Norton Rose Fulbright says this likely reflects the fact that these markets are already well penetrated by R&W/W&I, adding that permeation of these regions has happened relatively quickly, partly because of increasingly competitive pricing in the R&W/W&I market. “Pricing has dropped significantly since 2020 and 2021,” says Alberta Yan of Norton Rose Fulbright. “It has become relatively inexpensive for buyers to purchase R&W insurance, which is why you are now seeing some very low enterprise value acquisitions purchasing policies. Buyers are seeing the value, and sellers benefit from R&W insurance in many cases.” The survey shows that use of R&W/W&I insurance is expected to see the greatest increase in the energy & infrastructure space, which attracts 50% of respondents’ top-three votes, a significant increase from the Q1 2023 edition of this research, in which energy, infrastructure & resources accrued only 17% of respondents’ top-three votes, according to Norton Rose Fulbright. “There have been more energy and infrastructure deals in general and insurers have become more acquainted with the risk in this space, so the underwriting in this area has stepped up tremendously. That’s why you are seeing a big uptick and I think that will continue,” says Daryl L. Lansdale, vice chair of Norton Rose Fulbright in the US. The law firm surveyed 200 senior leading executives on the subject of global M&A trends and risks. The bulk of the respondent group (40%) is headquartered in the US and Canada, with 25% in Asia, 20% in Europe and the Middle East, 10% in Australia, and 5% in Africa.

Rebound in M&A activity expected in 2024

Fuelling demand for representations & warranties/warranty & indemnity insurance

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