Regulatory – Antitrust and Competition

United States

U.S. antitrust enforcement agencies are expected to continue their vigorous merger enforcement in 2024. Through the long-awaited publication of the Department of Justice (DOJ) and Federal Trade Commission (FTC)’s Merger Guidelines in December 2023, the agencies signaled they will keep pursuing novel theories of harm to challenge mergers that, in the past, may not have been subject to scrutiny. The Merger Guidelines create more risk and uncertainty, as dealmakers try to anticipate how the new guidelines will be applied by the agencies and whether the guidelines will be adopted by the courts.

The Merger Guidelines cover horizontal and vertical mergers, and establish lower structural presumptions of harm as a basis for transactions the agencies presume will substantially lessen competition or tend to create a monopoly. In addition, the Merger Guidelines outline the agencies’ focus on mergers that entrench or extend a firm’s dominant position, are part of a trend toward industry consolidation, or may lessen competition in labor markets. The Guidelines also support the agencies’ review of a series of acquisitions in the same or related business lines (even if none of the deals alone would violate the law), dovetailing with recent efforts by the FTC and DOJ to target private equity “roll-ups,” particularly in the health care industry.

Finally, a potentially significant change to the burden and timeline for antitrust merger clearance is on the horizon: in June 2023, the FTC and DOJ issued a proposed rule that would make extensive changes to the information and documents required in connection with premerger notification reports under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. We expect that some version of the rule will come into force in 2024. If implemented, the proposed changes would require parties submitting HSR filings to provide significantly more information and documents than is currently required – nearly quadrupling the average expected preparation time required for each filing and resulting in significant increases in the costs to prepare such filings.

EU

EU competition authorities are expected to remain active and to continue assessing transactions with an expanded view on theories of harm. Proposed transactions between competitors with horizontal overlaps will continue to attract in-depth regulatory scrutiny in Europe, and combinations which, in the European Commission’s view could strengthen an existing digital ecosystem or could give the acquirer access to vast amounts of private data about consumers, will also receive focus from the Commission.

While the merger environment for big tech platforms is getting tougher in Europe, the Commission is trying to streamline its merger control proceedings for non-problematic transactions by updating its rules for a simplified clearance procedure. These cases, often relating to limited horizontal or vertical overlaps, still make up the vast majority of deals.

In addition to merger control review and scrutiny, the new EU Foreign Subsidies Regulation (FSR) has started to apply. The FSR aims to prevent non-EU subsidies from distorting the EU market and requires notifications of M&A transactions if the parties meet certain financial thresholds. Initial experience with these filings reveals that the FSR is applying to more transactions than initially anticipated.

Transacting parties have also had some difficulty providing information about foreign subsidies from all around the globe, and dealmakers in 2024 will need to build in sufficient preparation time should an FSR filing be required.

Also at the EU Member State level, national antitrust authorities, such as the German Federal Cartel office are increasingly deploying novel merger control tools, such as the transaction value threshold, to require notifications of transactions with small target companies not yet generating significant revenues. We expect this trend to continue during 2024.

Regulatory – FDI Regimes

FDI rules will see meaningful developments across Europe, the United States, and beyond in 2024. New FDI regimes come into force in business hubs, such as Ireland, and there will be revisions to the FDI rules in important jurisdictions for global transactions, such as the UK, France, and Germany. Also in the EU, the European Commission’s proposed revisions to the coordination mechanism of the bloc, if implemented, could result in more harmonized procedures among EU Member States.

We also expect an expanded reach for national security screenings in 2024. In addition to reviewing standard acquisitions of shares or assets, agencies will focus on non-traditional transactions, such as greenfield investments, IP transfers, minority stakes, transactions involving sanctioned individuals, and internal reorganizations. As a result, FDI proceedings will become more complex and time-consuming, risking delays to closing timelines and even requiring remedies to close certain transactions. In response to these developments, parties to transactions in certain jurisdictions are more likely to litigate against intervention decisions by national agencies, particularly as some companies have succeeded in overturning prohibitions.

We expect that the Committee on Foreign Investment in the United States (CFIUS) will continue to scrutinize foreign investments in U.S. businesses, including controlling and noncontrolling investments in U.S. businesses with national security sensitivities or supply chain vulnerabilities. 

We also expect CFIUS will continue to ramp up its review of completed transactions that have not been notified to the Committee, particularly if the transactions involve U.S. businesses dealing in critical technologies, critical infrastructure, or sensitive personal data, and to increase its enforcement of compliance with mitigation agreements.

In a significant new development, the Biden Administration appears to be on the verge of establishing an outbound investment program that, on national security grounds, will prohibit or require notification of certain U.S. outbound investments in three Chinese advanced technology sectors: (i) semiconductors/microelectronics, (ii) quantum computing, and (iii) artificial intelligence. We expect that the U.S. Treasury Department will issue a final rulemaking for the outbound investment program at some point during 2024.

While many jurisdictions in Europe, the United States, and Australia have become extremely strict in enforcing their FDI regimes, other jurisdictions in Asia (including China), the Middle East, Africa, and Latin America less frequently require FDI filings of global transactions, except where core defense assets or certain other sensitive sectors are involved (such as the postal, compulsory education, and certain other sectors in China). Given the more difficult economic situation in these jurisdictions, we expect this lenience to continue as many economies do not want to jeopardize foreign investment.

See our Global FDI Legal Guide for more insights.

Geopolitics

Macro issues, both anticipated and unforeseen, will play a major role in the M&A markets during 2024, with significant events in much of the world introducing risks that may impact local and global transactions.

With major elections in the Americas, the Asia-Pacific, and the United Kingdom occurring this year, dealmakers will need to consider a variety of political outcomes that could have meaningfully different implications for M&A.

Americas

In the United States, the upcoming presidential election may prove to be at historically contentious levels, but may not, on its own, impact dealmaking as predictably as in prior cycles. While antitrust enforcers in a second Biden term will likely maintain their current policies, their views are broadly understood and have been digested by dealmakers. In a second Trump administration, it seems reasonable to assume that antitrust regulators would generally favor dealmaking as contributing toward a positive economic impact on the United States, subject to constraints upon foreign investment in the United States associated with an “America First” mentality.

In Latin America, recent elections have brought a sense of stability in some countries, like Brazil, and great uncertainty in others, like Argentina. However, following a period of significant economic reform in Argentina, this uncertainty is buoyed by a hope of economic stability.

United Kingdom

In the United Kingdom, polls and pundits suggest an election victory for Labour. However, boards and investors are not jumping to early conclusions, particularly given recent history and similar electoral circumstances with the Brexit referendum and, even further back, an unlikely Conservative election win in 1992. Political uncertainty will remain throughout 2024, but businesses and investors will demand stability and consistency and will likely support whichever administration is considered more capable to provide that.

Asia-Pacific

In Asia-Pacific, as China confronts economic challenges domestically, and tension deepens between East and West, we expect more transactional opportunities to emerge within Japan through its low interest rate environment, weakening value of the yen, and the government’s ambition to become carbon neutral by 2050, as well as more transactional opportunities in Australia, through its growing national security cooperation with the United States. As a consequence of the likely decoupling between East and West, Chinese state-owned enterprises will continue to acquire energy and natural resources assets around the world to secure supply chains and to safeguard against impacts from geopolitical tensions, while an emerging private sector within China will engage in transactions supporting electric vehicles, batteries, and energy storage. Western investors, particularly those located within the United States, may continue the trend of divesting assets in China.

Political processes will not be the only macro trend to influence M&A markets, as armed conflicts in Europe and the Middle East continue to have a considerable impact on the global economy and on regional dealmaking. A pause in hostilities or permanent resolution to ongoing conflicts will give rise to renewed interest in deploying capital to these regions, including in Israel’s thriving technology and life sciences and health care sectors, and Saudi Arabia’s rapidly expanding post-oil economy.

With geopolitical uncertainty reaching its highest levels in decades, dealmakers will recognize that undertaking complex M&A transactions in the current environment will require astute structuring, accommodation for longer timelines, and multi-faceted scenario planning.

IIJA and IRA

 

Following the acceleration of the US$1.25 trillion in U.S. federal spending provided under the Infrastructure Investment and Jobs Act of 2021 (IIJA) and the implementation within the United States of tax credits and other fiscal subsidies for clean energy investments enacted under the Inflation Reduction Act of 2022 (IRA), we expect the IIJA and IRA to provide significant fiscal stimulus and spur private investment in the United States during 2024 and beyond.

IIJA

The IIJA provides for more than US$1.25 trillion in federal spending over the five-year period from 2021 to 2026 across a wide swath of federal infrastructure investments. Combined with the tax incentives and spending provided under the IRA, the significant fiscal stimulus provided by the IIJA will continue to provide a tailwind for U.S. infrastructure investments in 2024, both in traditional infrastructure areas like roads, bridges, airports, and water infrastructure, but also in broadband deployment, hydrogen production, EV charging, cybersecurity, battery technology, and critical minerals supply chain. We expect these subsidies to continue to spur private investments in these areas as well, encouraging continued growth in M&A investment in these sectors throughout 2024.

IRA

We expect the economic impact of the IRA to be even more significant than that of the IIJA, in particular for clean energy investments, over the course of 2024 and beyond. Heralded as the “third energy revolution,” it is believed that the tax and other federal incentives included within the IRA will spur approximately US$3 trillion in clean energy technology investment in the United States by 2032, and US$11 trillion of investment in this area by 2050.

In addition to the tax incentives, the IRA also provides more than US$300 billion in loan authority for various clean energy investments and US$10 billion in competitive tax credits – available by application and award – for U.S. clean energy manufacturing projects.

During 2024, we expect the Biden Administration to accelerate its efforts to clarify the rules underlying IRA incentives, thereby facilitating an increase in the number and significance of deals to capture the associated benefits in well-established sectors, such as wind, solar generation, and biofuels production, as well as in hydrogen production, advanced nuclear generation, carbon capture and sequestration, and U.S. manufacturing of solar cells and wafers, battery cells and modules, wind turbines, and critical minerals mining and processing.

U.S. Litigation Landscape

The United States remains the jurisdiction with the most transactional activity and the greatest number of business disputes in the world. Taken together, these elements produce a predictability of outcomes that facilitate successful dealmaking under U.S. laws and norms that we expect to continue in 2024. This past year, Delaware courts issued notable opinions on several topics, including the continued resurgence of Caremark claims for breach of the duty of oversight; the proper standard of review for conflict of interest transactions (including the application of Corwin cleansing); the interpretation of contract language in foundational documents and standalone agreements; and the importance of proper compliance with books and records demands. In 2024, we expect to see the Delaware courts continue to develop the law in these areas and beyond.

The decision by the Delaware Supreme Court in Marchand v. Barnhill led to a renewed focus on Caremark, and Delaware courts have since issued numerous decisions addressing the scope of the duty of oversight and the facts that a stockholder needs to plead under “prong one” (no reporting systems) or “prong two” (disregarding red flags).

In 2023, Delaware issued important decisions extending the duty of oversight to officers and applying statute of limitations and tolling principles to Caremark disputes. In 2024, we anticipate further refining of the Caremark doctrine.

At the end of 2023, several notable cases involving conflicted transactions were pending before the Delaware courts and, in the first quarter of 2024, the Delaware Court of Chancery issued decisions in two of these matters, In re Match Group, Inc. Derivative Litigation and Tornetta v. Musk. These decisions, along with others we expect to come to a resolution in the remainder of 2024, will provide further insight into the courts’ developing views as to who is a controlling shareholder, what constitutes a conflicted transaction, and when and how a special committee should be implemented.

2024 may also see developments around ESG. Companies and shareholders alike continue to juggle “greenwashing,” “greenhushing,” new ESG disclosure rules, and the uptick in backlash litigation. While ESG litigation is often brought on a variety of theories in many different courts, Delaware has one case pending that alleges breach of fiduciary duty for taking actions that benefit the company but have a “net-negative” impact on society. Guidance from Delaware courts on ESG issues will be significant for Delaware-incorporated entities and beyond.

See our 2024 Securities, Shareholder, and M&A Litigation Outlook for more insights.

Private Equity

2024 is expected to be a busy time for private equity, particularly for the middle-market. Financial sponsors will be under pressure to deploy capital to demonstrate to investors that they are putting their money to good use before investment periods expire. Private equity sellers will also feel pressure to harvest their portfolio and return capital to their investors. This combination of factors will bring willing buyers and sellers to the table at stabilized valuations and will increase the amount of dealmaking.

In addition to the increase of traditional buyout transactions, sponsors will have a tranche of investments from a few years ago that will need to be refinanced and will need to make difficult decisions to meet their existing debt obligations. We expect more stressed and distressed M&A opportunities to appear in the market and debt-for-equity swaps for those businesses where lenders are willing to back management in the hope of a successful turnaround.

NAV lending, structured preferred equity, and GP-led transactions have become and are likely to continue to become even more popular approaches for private equity to realize some cash from investments, without triggering a “fire sale” or foregoing all ordinary equity future upside. European IPO market activity remains muted, but the U.S. IPO market has shown early signs of opening and creates an alternative exit route for sponsors. Private credit will continue to grow, as investors look for creative opportunities where traditional lenders are less comfortable.

ESG

Dealmakers will continue to consider ESG principles in M&A transactions during 2024, even though, in the United States, there are differing views as to the economic impact of their application, and, in Europe and elsewhere, the term “ESG” has been displaced by more specific regimes implementing such policies.

In America, the ESG landscape is varied and unsettled. California has enacted ESG-related disclosure requirements applicable to public and private companies with activities in California, whereas other states have enacted or proposed anti-ESG legislation. Developments in the U.S. courts further complicate the application of ESG principles, particularly insofar as the “S” within the ESG moniker is concerned. 

In other countries, the trajectory toward implementation of ESG principles into law and regulation has continued. In the EU, effective from the beginning of 2024, the European Sustainability Reporting Standards (ESRS) require companies to report matters that are financially material or material in terms of “impact” for sustainability-related topics.

Beyond the EU, a number of countries — including Australia, Canada, Japan, Nigeria, and the United Kingdom — have stated an intention to adopt into national law the sustainability disclosure standards defined by the International Sustainability Standards Board (ISSB).

Nature and biodiversity will continue to be a focus, exemplified by the announcement in early 2024 of 320 organizations (including many global companies) adopting the Taskforce on Nature-related Financial Disclosures. Back in the United States, the implementation of these new international standards will likely intensify the “greenwashing” and other ESG-related litigation trends of 2023.

See our ESG Global Vision for more insights.

Sectors to Watch

Energy

Energy will continue to be among the most active sectors for transactional activity in 2024, with an increase in dispositions, and restructurings leading to industry consolidation.

Energy transition is here to stay. 2023 saw COP28 promoting the “beginning of the end” of the fossil fuel era, setting goals of tripling renewable energy capacity and doubling energy efficiency improvements by 2030.

2024 will be a crucial year for implementing climate action plans and other initiatives to support the new disclosure regimes and associated economic imperatives. Industry players seem poised to coalesce around bankability and market standards for newer segments of energy transition, such as critical minerals mining, hydrogen, P2X, sustainable aviation fuel, and direct-air capture.

Meanwhile, traditional energy sources will continue to play a major role both in the energy industry and in driving M&A activity, as increases in global energy demand outpace growth in clean energy. We also expect another busy year for upstream M&A, including spin-off activity resulting from the blockbuster 2023 Chevron and Exxon M&A transactions.

See our Energy Transition Hub for more insights.

Life Sciences and Health Care

The M&A landscape in the life sciences and health care sector is primed to remain robust in 2024, especially in the pharmaceutical and medical device spaces where buyers maintain very strong balance sheets. Advancements in biotechnology innovations, including in areas beyond traditional drug development, such as gene editing, cell therapy, and RNA-based therapeutics, are expected to propel strategic acquisitions and partnerships.

The integration of digital health technologies will continue to reshape health care delivery, with significant investment expected in telemedicine, health data analytics, and AI-driven diagnostics. Next-gen technologies that facilitate product development are also expected to be a focus area for buyers. As a result of regulatory challenges and unknowns for such products, companies who have addressed regulatory hurdles early in their life cycle will be of particular interest to buyers.

The sector will continue to prioritize transactions that improve supply chain resilience and enhance manufacturing capabilities for pharmaceuticals and other health care products. Cross-border deals are also anticipated to increase in volume as companies seek to diversify and expand globally into new and developing markets. In parallel, private equity activity in the life sciences and health care sector is also expected to grow throughout 2024.

See our Life Sciences and Health Care Horizons publication for more insights.

Mobility

The automotive and mobility M&A market in 2024 is likely to be heavily influenced by the industry’s shift towards electrification and a need to acquire capabilities in battery technology. Automakers will seek to secure access to advanced battery designs and materials to improve range, efficiency, and safety as well as further integrate and strengthen battery supply chains.

M&A activity is also likely to target companies specializing in fast-charging infrastructure to enhance the convenience and practicality of EVs, addressing one of the primary consumer concerns impacting the adoption of EV technology.

Additionally, as the volume of end-of-life EV batteries increases, acquisitions and investments in the battery recycling sector are expected to rise, driven by the need to manage battery waste and recover valuable materials in a sustainable manner.

The focus on electrification will prompt automakers and suppliers to navigate challenges such as, securing raw materials, scaling up production capabilities, and adapting to evolving legislation and regulatory standards that encourage sustainable practices and localizing investments in the EV battery supply chain.

See our Getting the Deal Through – Automotive and Mobility guide for more insights.

Technology

In 2024, technology M&A is poised for dynamic growth and strategic realignment. Emerging trends like AI, blockchain, and the metaverse will drive a surge in acquisitions as companies pursue innovative capabilities and strategic advantages. With regulatory scrutiny intensifying, dealmakers will navigate complex compliance landscapes while seeking opportunities for synergistic partnerships.

Driven by “right-sized” valuations, startups will remain hot targets, attracting investment from both tech giants and traditional players looking to stay competitive in a rapidly evolving landscape.

Cross-industry collaborations will accelerate, fostering convergence and unlocking new avenues for growth. Sustainability concerns will increasingly shape dealmaking strategies, with a focus on eco-friendly technologies and responsible business practices.

In 2024, technology M&A will be characterized by agility, innovation, and strategic foresight as companies adapt to seize opportunities for future disruption and to drive value in a hyper-connected world. With all indicators moving in the right direction, look for a robust return of tech M&A in 2024.

See our AI Hub for more insights.