Inflation: Overcoming the Pain

Even if you are old enough to remember the big hair and blue eye shadow of 1980, you may not recall the pain of that year’s 13.5% inflation rate. While it’s not quite that bad today, our current 3.1% inflation still hurts, especially as we recover from 2022’s 6.5%. Consumers indicate that inflation is the overriding concern entering 2024, topping out worries about unexpected expenses and economic uncertainty. While it’s a bit early for celebratory fireworks, Fed Chair Jerome Powell confirmed last month that inflation had “eased,” and he signaled three possible cuts to the interest rate in 2024.

M&A: Modest Demand Around the Bend?

The volume of M&A transactions across sectors has been falling year-over-year, as well as the average value of these deals (except for the energy sector, which saw a rise). It’s understandable that investors would be jittery when considering M&As. Beyond inflation, there’s general global uncertainty and unless you’ve taken up residence under a rock, you may have noticed it’s an election year in the U.S. Political flux can mean reticence among investors to make and close deals. Still, with interest rates level or falling in 2024, and a growth in private credit, there could be modest pent-up demand out there (especially in healthcare, energy, and tech sectors), even if the regulatory environment hampers big-ticket deals. Watch this space. There’s deal-making to be had.

“My [2024] outlook is stable – we’re going to continue to see a steady flow of deals. We’re not going to see the craziness that we had in 2021. But on the other hand…predictions of the demise of M&A are overblown.”
– Melissa Sawyer, Global Head of M&A, Sullivan & Cromwell LLP