M&A activity will 'emphatically' pick up, PwC says

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• PwC expects dealmaking to ramp up with war chests of cash on the sidelines ready to be deployed.
• Companies are "figuring out which businesses are better in their hands versus someone else's hands."
• "I'm very bullish that the M&A market will come back later this year or early next," PwC told Insider.

PwC expects M&A activity to "emphatically" pick up.

Dealmaking was busy in 2021 and 2022, with "massive amounts of capital" deployed, Neil Dhar, vice chairman and co-head of consulting at PwC, told Insider. Of course a natural slowdown followed, he said.

Many companies, having "done just fine" on recent fundraising tours, have built up war chests of capital they're now ready to deploy.

"I think now they feel a lot more comfortable about the deal markets," he said.

"We have a ton of capital on the sidelines," he added. That's both cash on corporate balance sheets and in private equity. "I'm a big believer that private capital is — has been — and will continue to be a massive stimulant of the economy — of overall growth and deal activity."

Dealmaking has dried up this year. The total value of M&A fell to $732.82 billion in the second quarter of 2023 from $1.14 trillion in the second quarter of 2022, according to Dealogic data as of June 29, Reuters said.

Companies have had time to adjust, though, and as we head into the final quarter of the year, they're more comfortable with the way the market is now. Everyone, including CEOs understand that high interest rates and relatively high inflation are here to stay.

"We know now the tight band of what the Fed is going to do and what interest rates are going to look like," Dhar said.

This means that sellers understand they're "not going to get 2021-2022 prices," so the gap between buyers and sellers "is starting to equalize."

Dhar said corporate clients are reviewing portfolios and "figuring out which businesses are better in their hands versus someone else's hands."

He pinpointed healthcare — specifically biotech, broader biology, and life sciences — as an industry poised to bounce back from a slow period.

And like many others, Dhar is bullish on the future of generative AI, as well as so-called cyber and climate businesses.

"These are all going to fetch massive valuations," Dhar said.

He continued: I'm very bullish that the M&A market will come back later this year or early next. And I think you'll see things like the capital markets IPOs and things come back toward the back end of '24."