Rusty Wiley, the CEO of Datasite, a prominent SaaS platform used by global enterprises, anticipates a historic year for politics in 2024, with over 64 countries holding national elections. A recent Datasite poll reveals that more than half of America’s dealmakers foresee geopolitical shifts having a significant impact on dealmaking, particularly due to challenges such as high inflation, interest rates, and ongoing geopolitical conflicts affecting the global financial markets.
In response to these pressures, political parties are focusing on domestic growth to counter inflation, prioritizing local investment and productivity. This shift towards a more national approach could have substantial implications for financial professionals engaged in mergers and acquisitions (M&A) activities.
To prepare for the upcoming wave of 2024 elections, dealmakers will need to consider multiple economic factors at play, including interest rates and regional instability. High borrowing costs due to interest rate hikes have influenced deal financing, with inflation above targeted levels in countries such as the U.K. and the U.S. The economic volatility in regions like the Middle East and Eastern Europe is impacting investor confidence and affecting revenue, production, and stability for companies reliant on international trade.
The pressures from interest rates, inflation, and geopolitical instability may explain the significant drop in M&A activity in 2023, but deal closure rates in Q1 2024 have rebounded. Deal due diligence times have decreased, potentially due to dealmakers wanting to finalize agreements before elections. However, as the election dates draw near, M&A activity may slow down as dealmakers adopt a more cautious approach based on campaign-driven financial and market conditions.
After the elections, the implementation of economic and foreign policy plans by winning parties could lead to a revitalization in M&A activities. Historical data shows mixed results post-election in the U.S., indicating uncertainty about the future trajectory of M&A deals. Private equity dry powder from 2023 and alignment in valuation expectations between buyers and sellers could drive new opportunities in the M&A landscape, despite geopolitical instabilities and potential policy shifts.
The upcoming U.S. and U.K. elections will be critical for the financial sector, as governments address inflation, emphasize local productivity, and potentially prioritize national over international interests. Deal-ready professionals can navigate this landscape by understanding potential outcomes and planning efficiently to capitalize on opportunities that may arise in the aftermath of the elections.
