AI focus to drive global M&A activity upswing in 2024, says Gartner

According to Gartner, the global downturn in mergers and acquisitions (M&A) activity will continue to decline from record highs in 2021. It will be counteracted in 2024 by a renewed emphasis on technology, specifically artificial intelligence (AI). The renowned research and advisory company believes this shift in focus will significantly boost organisations to reenter the M&A market next year.

Gartner has identified key global M&A trends for 2024, which include the unlocking of M&A opportunities through technology amid macroeconomic ambiguity (known as techquisitions), a need for new strategies to acquire AI-based businesses, improvement of the M&A process through AI, and an expected increase in regulatory scrutiny hindering large-scale M&A activity.

Notably, the stalwarts of the Australian AI scene have seen significant growth recently. Telstra Ventures secured AUD $39.5 million in funding for AI solutions provider Cranium. Mirae Asset Global Investments of Korea acquired Sydney-based robo-advisor Stockspot.

Similarly, Sydney's Simplyai, an AI consulting group, was taken over by Liverpool Partners. At the same time, Australian-based Telix Pharmaceuticals signed an agreement to acquire Dedicaid, an AI platform offering clinical decision support software.

Mark Carroll, VP Analyst at Gartner, highlights the changing M&A landscape, "Global M&A activity is continuing its downward march from record levels in 2021, down 50% from the peak. Macroeconomic and regulatory challenges reinforce the trend, but a renewed focus on technology, particularly AI, provides tailwinds for executives to reenter the M&A market in a big way next year."

Chris Ganly, VP Team Manager at Gartner, insists that M&A remains a growth engine for most enterprises. According to him, "Delivering M&A success will mean positioning their enterprises for market leadership for many years to come."

As for how macroeconomic ambiguity will impact techquisitions in 2024, Gartner forecasts that the ongoing confusion surrounding inflation, recession, employment, cost of capital, and business and consumer confidence will contribute to a ripe environment for M&A.

The organisation suggests that well-positioned enterprises should capitalise on this by pursuing acquisitions of smaller, technology-focused businesses with lower valuations and less access to funding than would typically be available in clearer economic conditions.

AI's usage will also play a pivotal part in enhancing the M&A process. Gartner asserts that AI's role will significantly boost the speed, efficiency and performance of M&A processes. It advises enterprises to trial AI internally in M&A processes in diverse use cases, such as contract analytics, for effective outcomes.

Focusing on the acquisition of AI-based businesses, Gartner opines that while such M&A is not yet a trend amongst enterprises, the focus on AI technology is expected to trigger a wave of deal activity in 2024. AI has been identified as the leading disruptive technology influencing industries and should be at the forefront of all business strategies in 2024.

Regulatory scrutiny will also play a crucial role in potential M&A activity. The trend towards increasing scrutiny, particularly on anti-competition and national security grounds, could hinder large M&A transactions. However, this scenario could also lead to a competitive advantage for enterprises best equipped to complete a higher volume of smaller, more industry-diverse M&A deals.