Private Equity dry powder set to stimulate M&A activity in 2024: BMS’ Private Equity, M&A and Tax report

Private Equity dry powder set to stimulate M&A activity in 2024: BMS’ Private Equity, M&A and Tax report 150 150 Haggie Partners

BMS, the independent specialist insurance and reinsurance broker, today announces the release of the fourth edition of its global Private Equity, M&A and Tax (PEMAT) report. The report draws on the expertise of BMS’ global PEMAT team, its clients, and insurers in the market to provide a comprehensive analysis of the trends from 2023 and detailed outlooks for the UK, European, North American, Asian, and Middle East and Indian M&A markets.

As predicted in last year’s report, 2023 saw dealmakers and insurers manage the fallout from the Covid-19 pandemic, as well as the emergence of macro developments such as geopolitical tensions and increased regulatory scrutiny, leading to a soft M&A insurance market. Looking to 2024 however, there are reasons to be optimistic. Private equity funds have been able to increase their committed but unallocated funds, and 2023 saw a 21% increase in overall enquiries for the BMS PEMAT team compared with 2022, suggesting that there is a strong transaction appetite and that dealmakers have the capacity to make up for an inactive year.

Key findings

  • Macroeconomic developments and the latent impacts of Covid-19 caused low deal activity leading to a soft M&A insurance market with an abundance of capacity being readily available and insurers lowering premiums and average policy retentions to win business
  • The soft market emphasised disparities in valuations between buyers and sellers and proved an obstacle to deal completion
  • After an era of cheap debt, the wave of insolvencies because of Covid-19 came to fruition, but this didn’t translate into an increase in distressed sales in 2023 but there may be more to come in 2024
  • The secondaries market saw a slow start to 2023 but increased in activity in Q4 with LP-to-LP transfers dominating transaction volumes as the denominator effect continued to drive the sell-off of GP interests
  • While 2023 was quieter from a dealmaking perspective, warranty & indemnity claims saw a surge in activity off the back of the boom of M&A activity in 2021 and 2022
  • Renewables & energy, financial services and retail & consumer were the most resilient sectors, seeing increases in deal volume in 2023 compared with 2022, despite the M&A downturn
  • Asia, the Middle East, and India were the most stable markets. Asia saw an influx of new insurers and exhibited a broader risk appetite, and while the Middle East and India saw a decrease in the overall number of deals, an increase in $1bn+ enterprise value deals saw the value of transactions remain close to 2022
  • Despite the downturn in activity, an overall increase in enquiries made in 2023 compared with 2022 of 21% suggests a strong transaction appetite going into 2024

Tan Pawar, Managing Director and Head of Private Equity, M&A and Tax at BMS, said: “The market in 2023 was suppressed by challenging socio-economic and geopolitical developments and with those circumstances going nowhere fast and several upcoming elections, they will continue to influence deal flow. However, 2024 promises to be dynamic. Reduced interest rates and substantial dry powder within PE houses are likely to stimulate investment activity. At the same time, the appeal of emerging markets, as well as the resilience of sectors like renewables and infrastructure, will keep market conditions evolving.”

Launched in 2020, the BMS PEMAT team offers a full suite of client-focused and tailored M&A insurance solutions and since their launch have worked on more than 200 deals with a total transaction value of more than $100bn. The team has worked on transactions in 55 jurisdictions across five continents and recently extended its operations to Spain, Japan and the Middle East, increasing its service offering in these regions.

View the full report here