Signs investment banks are preparing for a bull market
Strategies for M&A success in 2024
A series of macroeconomic and geopolitical headwinds challenged M&A activity in 2023. We saw rising interest rates, geopolitical tensions, and recession fears contribute to heightened market uncertainty.
Increased pressure on financial markets translated to rising borrowing costs and price disagreements in the M&A market, which further constrained dealmaking. According to The Wall Street Journal and Dealogic, global M&A volume in 2023 totaled $2.95trn, down 18% YoY to end at the lowest level in a decade.
However, considering a broader time horizon for M&A performance puts this figure into perspective. Goldman Sachs notes that M&A activity in 2023 was in line with pre-2018 median levels and that average monthly volumes improved throughout the year.
Looking ahead, there’s greater consensus on a steadier macroeconomic backdrop, with cooling inflation and high expectations for rate cuts this year. Given improving market conditions and a growing surplus of dry powder, dealmakers are hopeful that 2024 will be a better year for M&A.
“We’re seeing a labor market that is coming back into balance by so many measures; and we’re seeing inflation making real progress. These are the things we’ve been wanting to see. We can’t know. We still have a ways to go. No one is declaring victory.”
We surveyed more than 350 investment bankers, both on the buy-side and the sell-side, to inform this report. Almost 70% of our respondents believe the M&A market will be more active this year. Our data shows that bankers are seeing a growing urgency from companies to pursue M&A in order to adopt AI, address ESG-related objectives, and drive strategic business growth.
So what can you do now to prepare for stronger M&A activity in the months to come? Find out the three areas that top investment banks are prioritizing to capitalize on more deal opportunities.
“Investment banking is nothing, if not, a relationship business, and Affinity is now core to our success.”
Relationships are foundational to investment banking, especially when it comes to deal sourcing. With expectations for an uptick in deal volume, firms are laying the groundwork to source more deals by prioritizing client relationships. Almost half of our respondents are focused on nurturing existing client relationships to prepare for the year, while 53% are expanding their firm’s network.
Crucially, the majority of deal opportunities for the year are already sitting within investment bankers’ networks—with 58% of our respondents expecting over half of their deals to come from their firm’s existing relationships.
The key is building on and using these established connections to unlock opportunities.
58% of firms expect over half of their deals will come from their firm’s network.
Despite how important relationship management is to winning deals, many deal teams grapple with inefficiencies in finding new clients and building relationships. Investment bankers often lack visibility into their firm’s collective network, making it difficult to identify mutual connections and use the strongest relationships strategically during prospecting.
"One of the perennial challenges any investment bank has is actually getting a hold of the right person at the company… a great start on that is sending them an email from somebody they already know and have a relationship with, and identifying who that person is just falls out naturally from Affinity.”
When asked what firms plan to make more efficient in 2024, 56% of respondents listed ‘finding new clients’ and ‘building relationships for future deals’ as their top two priorities—above deal sourcing and deal management.
This underscores the pivotal role of relationships to investment banks this year.
To prospective clients, your firm’s network is also a selling point, so it’s crucial to understand the depth and strength of all the relationships within it. In many cases, M&A advisors are selected not just for their understanding of market dynamics and the key drivers of a company’s business, but also for their access to prospective buyers.
To address these challenges and help uncover deal opportunities within their existing networks, firms are integrating relationship intelligence into their processes and tools.
“Our clients want to know that we have key access to decision-makers. We’re able to show them this by showing them the core of our CRM system—Affinity. It’s about being honest and truthful—that is what matters to clients.”
Relationship intelligence encompasses all of the valuable insights in a firm’s shared network—like who knows whom and the strength and history of each relationship.
With Affinity for Salesforce, you can:
Affinity automatically captures your firm’s collective network and every contact you’ve pitched to via emails and calendar invites. It assesses and analyzes every relationship to find the right connection to your next client.
Affinity parses your firm’s network to uncover existing but hidden opportunities and increase your universe of quality contacts.
Relationship intelligence looks across your organization’s shared network and identifies which person in your company is best suited to make an introduction. Affinity data shows that warm introductions can help you close deals 25% faster.
100% of our respondents plan on implementing AI.
As the race to adopt AI intensifies, our data shows that firms are overwhelmingly receptive to investing in new technologies. A full 100% of our respondents said their firms plan on implementing AI.
We also asked if firms are more interested in considering technology this year compared to previous years, and 71% said yes. With all respondents planning to adopt AI and a vast majority interested in implementing new technology in the near future, it seems that budgets are on par to make AI adoption a reality.
Despite upfront costs, there’s a clear revenue incentive for firms to integrate AI. Deloitte estimates that AI can improve productivity in investment banking by an average of 34% and increase revenue by $3.5m per front-office employee by 2026.
To capitalize on and manage more opportunities, firms are focused on getting deals done faster. The question is how firms will incorporate AI.
“We were spending so much time, effort, and money on manual data entry. We were spending money to put this information into our system without leveraging it for a real return on investment. Figuring out a way to make that workflow process easier and more functional was something I cared a lot about.”
From drafting legal documents and identifying new clients to streamlining RFP and due diligence processes, AI has the potential to transform the way investment banks operate. And investment banks are planning to implement AI across divisions, functions, and deal milestones.
On the dealmaking front, AI can expedite productivity throughout the deal lifecycle:
AI ultimately frees bankers to focus on finding and structuring more transactions and building client relationships.
Despite these advantages, 60% of respondents believe that the capacity and timeline to implement new technology is the biggest barrier to deploying AI. It will be important for firms to seek technology that’s easy to adopt and seamlessly integrates with the tools they’re already using.
.png)
Affinity for Salesforce automates record creation and enrichment, saving 200+ hours of manual data entry per employee year. With Affinity for Salesforce, you can:
Eliminate data drudgery by automating the creation, update, and enrichment of CRM records.
Track and identify a company’s growth intentions with richer Salesforce reports and dashboards that incorporate metrics like employee growth, team activity, and pipeline velocity.
Graphically depict and manage your deal pipeline alongside your contacts with enriched and customizable Salesforce dashboards—enabling deal teams to see every opportunity at each stage.
"Because Affinity is more intuitive [than our old system], you don’t have to go through a big training program. If we wanted to properly scale our old system, it would have taken up to twenty hours of onboarding training for new team members. Now, everyone is able to use Affinity immediately."
As investment banks gear up for an increase in deal volume, they’re using technology to improve their processes for managing deals. More than half (60%) of firms plan to find better ways to use existing technology this year. When asked about the operational changes firms are making to increase efficiency in M&A transactions, 65% of firms reported implementing collaboration tools to streamline deal management.
65% of firms have implemented collaboration tools to streamline deal management.
Depending on deal size, it typically takes anywhere from six months to several years to close an M&A deal. And deals are often put on hold, meaning it’s important to maintain a consistent dialogue with clients, yet it can be difficult to keep track of logistics as your focus is drawn to live deals.
With bankers working across multiple platforms—manually updating spreadsheets and sifting through Outlook to pull notes from client meetings—it’s easy for information to get lost or forgotten and time to be wasted.
Firms are looking for a single, enriched record of all relationships and deal data to streamline processes.
“Your deal work happens everywhere but your CRM. It’s where you record your information and where it’s available, but work involving deals and opportunities are in your inbox, on websites, and in your meetings… Affinity is more than our relationship management tool. We use it to run our business. We track all of our deals, contacts we make for each deal, and our potential clients in one place.”
“Having immediate access to information about performance and providing insights to clients on crucial business activity is exactly the competitive advantage we need.”
In response to these challenges, firms are augmenting their CRMs with technology that helps build a centralized, systematized approach to relationship and deal flow management.
They’re tracking all of their contacts, potential clients, and deals in one place—while also surfacing useful insights on their network, like the strongest relationships in their firm, recent deals they discussed, previous opportunities, the right point of contact, or the person best suited to make a client introduction.
The result? Bankers can work more efficiently on closing the highest quality deals.
Optimize the way you manage deals by storing all of your relationship and dealmaking data in one intuitive hub. With Affinity for Salesforce, you can:
Store all of your deal data, company engagement history, meeting notes, and contact information in one place.
Check your network connections, access deal insights, add notes, update your deal pipeline, and modify or create Salesforce records as you navigate sites like LinkedIn or target company web pages.
Access enriched and customizable Salesforce dashboards and reports for a centralized view of your client roster, prospects, and company outreach.
Given the uncertainty with a hard or soft economic landing and market hesitancy surrounding the U.S. election, there are diverging opinions on how M&A will play out in 2024. Despite this uncertainty, investment bankers are optimistic that 2024 will be a better year than the previous one.
According to EY’s annual CEO survey, 52% of US CEOs expect to do M&A in 2024. Companies with healthy balance sheets, particularly large healthcare and pharmaceutical companies, are ready to move forward with strategic M&A when conditions permit.
Even for those who lack conviction in improving market conditions, there’s a growing urgency from companies to pursue M&A. Almost 60% of our respondents believe companies will pursue M&A this year to enhance AI capabilities or acquire other technologies, while 53% anticipate moves to address ESG-related objectives.
The convergence of dry powder and favorable market conditions could set the stage for high levels of activity this year.
To navigate the potential uptick in deal volume, firms are focusing on nurturing and growing client relationships to source more deals. They’re also turning to technology, specifically AI, to increase efficiency and productivity throughout the deal lifecycle.
In a landscape where relationships are paramount, overlooking connections can lead to missed opportunities, and inefficiencies with deal flow management translate to teams lacking the bandwidth to support higher deal volumes. Investment bankers are focused on solving these problems now to remain competitive in the long run.
By strengthening client relationships, embracing AI, and streamlining deal flow management, firms won’t only enhance efficiency—they’ll position themselves for more deals in the coming months.
