The M&A landscape in 2024 is expected to make more noise after a relatively quiet 2023, driven by several key factors. These include potential stability in interest rates, pent-up demand, and industry-specific pressures to consolidate or divest, particularly with private equity firms anticipated to re-enter the market due to improved debt market conditions and the prospect of more favourable exit strategies.
This is a welcome contrast to 2023, which was marked by subdued activity, influenced by tepid economic growth, inflationary pressures, and cautious lending practices. The repercussions of these dynamics were evident over the last year, with a notable decline in both the frequency and value of transactions compared with previous years.
Positive indicators
The more positive macroeconomic indicators shaping the start of 2024 are playing a pivotal role in influencing investor sentiment and the appetite for strategic transactions. Additionally, the global economic outlook is showing tentative signs of recovery, instilling greater confidence among stakeholders and an anticipated rebound in deal-making as interest rates stabilise.
The technology sector, especially areas such as AI, automation and decision intelligence platforms, may witness increased activity, although caution and hurdles such as antitrust scrutiny persist. Overall, while challenges remain, greater economic clarity and the end of rate hikes could fuel global M&A growth in the coming year.
From a regulatory standpoint, impending changes, particularly in regions such as the UK and Ireland, are expected to catalyse M&A activity. The looming prospect of regulatory shifts, including potential amendments to capital gains tax rates, has spurred a sense of urgency among business leaders, prompting them to expedite their M&A plans to capitalise on current favourable conditions.
From an insurance perspective, underwriting demand is also evolving in line with the changing dynamics of the M&A, legal, tax and regulatory landscape. In a complex risk segment, we are seeing strong demand from clients to work with teams that have extensive experience in underwriting complex legal and tax risks, and that are able to provide tailored solutions that address the intricacies of M&A transactions with precision.
A commitment to excellence
At the core of Devonshire’s approach lies a commitment to technical excellence, innovation and product relevance. Our underwriting process is characterised by meticulous attention to detail and a deep understanding of the nuances inherent in TR insurance. Leveraging a comprehensive suite of products, including Warranty & Indemnity (W&I) Insurance, Tax Insurance, and Contingency Insurance, we offer clients bespoke solutions that mitigate risks and help to reduce friction in transaction processes.
Warranty & Indemnity (W&I) Insurance, a cornerstone of Devonshire’s offerings, serves to safeguard M&A deals by providing coverage for warranties and indemnities given in transactions. Our agile underwriting structure allows us to address a broad spectrum of risks across various jurisdictions and sectors, offering flexibility and strategic insights to our clients.
Tax Insurance, another critical component of our portfolio, enables clients to secure known tax liabilities, thereby enhancing the viability of transactions and providing balance sheet certainty in an often ambiguous regulatory landscape. Through streamlined negotiations and proactive risk management strategies, we empower clients to navigate the complexities of tax-related risks with confidence.
Contingency Insurance, the third pillar of our product suite, offers comprehensive coverage for legal risks identified whether as part of a transaction process or otherwise, ranging from litigation risk to insolvency scenarios. Our team’s proven expertise in structuring creative solutions enables us to address a wide range of legal challenges, facilitate deals, protect legal assets and mitigate potential liabilities.
As we look ahead to 2024 and beyond – and in a market where differentiation and relevance are key – our team is committed to standing as trusted partners, assisting our clients through the intricacies of M&A transactions and legal uncertainty with commitment and expertise.
