It's important for lawyers to stay informed about market expectations for the year ahead in the legal industry, not only from their own firms’ internal provisions but from other firms as well. With subdued M&A activity in 2023 there is an expectation 2024 will bring an uptick in dealmaking. In this article, I delve into what the corporate teams of some of the world's leading law firms are predicting for the year ahead. I also provide a short overview of what this means the for the top tier legal recruitment market.
The Current State of the M&A Market
Before diving into the predictions, let's take a look at the current state of the M&A market.
Law firms rushed to hire lawyers in 2021 and early 2022 to meet the surging demand in global dealmaking. However, with inflation soaring to 11.1% in October 2022 and interest rates climbing from 0.75% in May 2022 to 4.25% by April 2023, market conditions swiftly changed. Large law firms found themselves advising on fewer deals, with a reduced combined value, as mergers and acquisitions activity hit its lowest point in over a decade.
In the latter half of 2023 and the start of 2024 , the market outlook improved somewhat in line with a notable increase in recruitment activity among top-tier City firms, reflecting the expectation that 2024 will bring a more buoyant M&A environment.
As we look ahead, there are clear indications that it will be a busier year for both M&A and private equity investment compared to 2023. This market outlook is fuelled by improving macroeconomic conditions, such as falling inflation, allowing for potential interest rate cuts. However, amidst this optimism, a sense of caution prevails.
Top M&A Trends and Law Firm Market Predictions for 2024
I’ve collated a selection of articles, prepared by some of the worlds leading law firms, which set out their expectations and predicted trends for the corporate M&A market in 2024. I found these articles to be particularly insightful.
Clifford Chance has highlighted five key trends for the year.
1. Energy Transition: Shifting government policies drive M&A
2. Tech: AI in the M&A spotlight
3. Antitrust: Extended timelines and closer scrutiny
4. Supply Chains: Pursuit of supply certainty fuels M&A
5. Private Capital: Unblocking deal pipelines
You can read more about these 5 trends here.
However, caution is warranted, as highlighted by Sarah Jones, Global Head of Corporate, who emphasises:
"Uncertainties caused by complex geopolitics and upcoming elections could put a dampener on this activity, so the full extent of the increase is hard to predict."
Allen & Overy also highlight how a key trend will be private capital prioritising investment into AI and technology in global businesses, an expected uptick in Life Sciences M&A and the potential for more European public-to-private transactions over the coming months. A complex regulatory environment is also a key theme.
Skadden have provided a concise summary of the factors that affected M&A in 2023 and how, 'cautious optimism', of a rebound in deal activity will result if these factors recede.
The Private Equity team at Cleary Gottlieb shared a superb outlook report for the Private Equity sector, noting that as inflation has come down and interest rates have plateaued, "Should the environment remain largely unchanged, then this could begin to signal better conditions for private equity investment and activity could pick up again over the course of 2024." It’s a great read. They highlighted five key expectations:
1. Improving Exit Environment Could Unlock Private Equity Activity
2. Buyer and Seller Price Expectations Will Converge Further
3. Public Markets Will Yield Investment Opportunities But Will be Out of Favour for Exits
4. Firms Will Continue to Seek Creative Ways to Access Liquidity
5. Bank Will Become More Competitive in Financing as Debt Funds Focus on Higher Quality
Corporate law m&a market forecast
Herbert Smith has shared a great article on the Global M&A outlook titled, 'Ready for Take Off'. Again, the common themes are an expectation of a pick up in M&A within the energy transition and technology sectors, a difficult regulatory environment and caution.
"There are good reasons to believe that 2024 could be a busy year across global M&A. But there is wariness in predicting the timing and speed of sustained recovery in activity levels."
I found Shoosmiths' Holly Hirst and Amit Nayyar's summary and conclusions about the private equity sector last year and expectations for the year ahead particularly interesting. It also has more of a focus on the challenges facing the private equity lawyer in recent times and moving forward through 2024.
What do these predictions mean for the top-tier legal M&A recruitment market?
2023 saw significant Partner moves, particularly within private equity focused practice areas, as firms implemented strategies to adjust to the new economic environment and to prepare for an expected pick-up in H2 of 2024.
However, the recruitment market for associate recruitment into the leading firms was significantly down compared to 2022. This is obviously a reflection of the downturn in M&A activity. Associate ranks swelled during the post covid M&A boom of 2021 and H1 of 2022 and recruitment was not required once that work receded.
If a very general summary from the law firms 2024 M&A outlooks is 'cautious optimism' with certain key sectors such as energy, technology and life sciences marked for growth then it is reasonable to expect corporate M&A recruitment to build as we move through the Q1 and Q2 and to expect a busier recruitment market in the second half of the year. This expectation and prediction is fragile, though, as it is dependent on continued macroeconomic improvements or, at the very least, a plateauing. Firms can afford to be careful and considered with their recruitment.
A key trend in this era of recruitment is that the standard of candidate required for a top tier international firm is very high. Generally speaking, firms can afford to wait for the perfect candidate and will not be pushed towards a quick hire in fear of missing out. There are always exceptions, of course, as aggressive recruitment is simply in some firm's DNA, but there is a clear trend towards waiting for the best candidate.
We hope you found this M&A market forecast helpful. If you are a corporate lawyer in the City looking to advance your career in 2024, reach out to me directly for a confidential discussion.
📧 jonathan.taylor@sonderconsultants.com
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