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Mega-Deals Thrive Amidst Global Uncertainty
31 Aug
Summary
- Deal momentum driven by available financing and open markets.
- Large strategic M&A deals surpass $10 billion amid global risks.
- Companies given AI spending leeway, with accountability by 2027.
Deal-making activity is robust, supported by accessible financing and liquid capital markets, even with higher interest rates. M&A activity is notably concentrated in large strategic deals exceeding $10 billion, demonstrating a strong imperative to transact globally despite geopolitical and economic instability.
Private credit has experienced a rationalization after significant influxes, which is viewed as a positive market correction. While high US yields affect sponsor calculations, the primary constraints for deal-making remain the monetization and exit strategies for private equity. Hyperscalers' significant AI financings are bolstered by third-party capital, with rigorous assessment of cash flows and guarantees.
Companies are currently granted considerable latitude regarding AI investments, with a projected increase in accountability expected around 2027. This leeway acknowledges AI's disruptive potential, though measuring its direct return on investment remains challenging.
