Third-quarter 2024 saw a slight increase in global M&A deal notifications, marking the second consecutive quarter of growth. According to the Q3 2024 Global M&A and Equity Offerings Report by S&P Global Market Intelligence, as quoted on BusinessWorld, global M&A notifications climbed 7.3% year over year, ending a 10-quarter streak of declines.
Following a sharp decline in 2023, global M&A activity has rebounded, fueling optimism for Q4 2024 and potentially 2025. Even though the increase in the M&A activity was modest, the positive shift is significant, given the downward trend in transactions since 2022, when the Fed took up a hawkish approach.
Numbers That Matter and Region-Specific Insights
The total value of global M&A deals has surged 29.1% year over year, reaching $708.74 billion in Q3, according to S&P Global. This second consecutive quarter of increased global M&A activity, is the first back-to-back rise since Q3 and Q4 of 2020.
Dealmaking in the Asia-Pacific region emerged as the standout performer on the global stage. According to S&P Global, M&A activity in Asia-Pacific showed signs of recovery in Q3 2024, with total deal values reaching $104 billion, a 67% increase from Q2 and an 11% rise from the same period in 2023. Deal counts also saw an uptick, marking a 12% increase from Q3 2023.
While the European M&A market experienced volatility due to elections, it saw a slight increase in both aggregate deal value and deal count in Q3 2024. On a year-over-year basis, aggregate deal values rose by 16.4% to $127.3 billion, while deal count increased by 8.4%.
According to S&P Global, the M&A market in the Middle East and Africa saw a modest uptick in Q3 2024, with aggregate deal values rising 7.4% to $10.1 billion, while deal volumes increased by 17%. The healthcare sector in the region experienced a significant surge in activity, with transaction values soaring from $62.5 million to $2 billion year over year, rising about 3,125%.
Exploring Other Drivers of Global M&A Activity
Easing financial market conditions, fueled by the Fed's interest rate cuts, rising expectations of further rate reductions and moderating inflation, also play a key role in driving the M&A market.
Following interest rate cuts in September and November, there’s a 68.2% likelihood that the Fed might go ahead with a third rate cut this year, lowering the rate to 4.25-4.5% in December, according to the CME FedWatch Tool.
Donald Trump securing a second tenure as the 47th President of the United States also bodes well. According to CNBC’s Jim Cramer, as quoted on CNBC, the Trump administration is more inclined to approve mergers and acquisitions, easing the stringent antitrust scrutiny of deals.
ETFs to Consider
Multiple factors driving a positive global M&A outlook for 2025, make increasing exposure to funds employing a merger arbitrage strategy, a smart move. Merger arbitrage, commonly seen as a hedge fund strategy, involves simultaneously buying and selling the stocks of two merging companies to generate 'risk-free' profits.
Below, we mention a few funds that employ merger arbitrage strategy, looking to capture the profit from the price spread between the target company's stock price after a public acquisition announcement and the price offered by the acquirer to purchase the target's shares.
However, often regarded as a 'risk-free' strategy, this approach carries the risk of deals falling to go through. Despite macroeconomic uncertainty and escalating geopolitical tensions causing some volatility, the overall outlook remains positive.
NYLI Merger Arbitrage ETF (MNA)
NYLI Merger Arbitrage ETF seeks to track the performance of the NYLI Merger Arbitrage Index with a basket of 46 securities. The fund has gathered an asset base of $ 218.5 million and charges an annual fee of 0.77%.
NYLI Merger Arbitrage ETF has gained 2.07% over the past three months and 5.69% over the past year.
AltShares Merger Arbitrage ETF (ARB)
AltShares Merger Arbitrage ETF seeks to track the performance of the Water Island Merger Arbitrage USD Hedged Index with a basket of 50 securities. The fund has amassed an asset base of $78.5 million and charges an annual fee of 0.77%.
AltShares Merger Arbitrage ETF has gained 2.01% over the past three months and 6.25% over the past year.
FirstTrust Merger Arbitrage ETF (MARB)
First Trust Merger Arbitrage ETF employs an active strategy, seeking to provide capital appreciation by establishing long and short positions in the securities of companies involved in corporate events, like mergers and acquisitions.
The fund has gathered an asset base of $27.7 million and has a basket of 34 securities. MARB charges an annual fee of 1.8%.
First Trust Merger Arbitrage ETF has lost 0.6% over the past three months but has added 0.06% over the past year.
Proshares Merger ETF (MRGR)
Proshares Merger ETF seeks to trac the performance of the S&P Merger Arbitrage Index, with a basket of 36 securities. The fund has gathered an asset base of $10.5 million and charges an annual fee of 0.75%.
Proshares Merger ETF has gained 3.22% over the past three months and 8.06% over the past year.
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