M&A Showing Signs of Life in 2024

Is the Intelligize team clairvoyant? We’re obviously not, however, we must note that our recent M&A report states that oil and gas is an industry primed for consolidation. And then, as if on cue, oilfield services giant SLB on April 2 announces a $7.8 billion deal to buy ChampionX.

Our report discusses five different factors that we suggest will influence the M&A market in 2024 and beyond. Among them, we discuss the oil and gas sector as particularly ripe for dealmaking, noting that “[s]ky-high profits have left the biggest names among oil companies rolling in cash to spend on acquisitions.” Dating back to the final quarter of 2023, industry behemoths like Exxon Mobil and Chevron were already gobbling up competitors.

ChampionX stockholders will receive 0.735 shares of SLB stock for each share of ChampionX that they own. SLB is aiming with the deal to grow its “presence in the less cyclical and growing production and recovery space,” according to Olivier Le Peuch, the company’s chief executive officer. SLB estimates the combination with ChampionX would realize annual pretax synergies of about $400 million within three years of the deal closing via growth and cost savings.

Conditions in the oil and gas sector open it up to further consolidation going forward. Growing geopolitical tensions and a decline in drilling capacity in the United States are among the factors conspiring to drive up oil prices, resulting in even higher profits for oil companies. With a substantial surplus of cash on hand, the industry’s biggest players will probably stay on the hunt for compelling acquisition opportunities.

But what about M&A beyond oil and gas? Between a spate of banks collapsing and fears of a crash in commercial real estate, our report advises keeping an eye on the financial services sector as another likely candidate for dealmaking.

To be fair, financial distress isn’t limited to the banking sector. Far from it. Our report notes that corporate defaults vaulted up 80% in 2023 from the prior year. It also cites government data indicating corporate bankruptcies shot up 40% year over year in 2023, along with an upturn in public companies disclosing corporate financial distress in their risk factors.

Additionally, the inhospitable conditions for transactions last year left the usual dealmakers hungry for more activity in 2024, according to the report. With more private equity buyers sitting on the sidelines a year ago, they now have ample capital to deploy.

With nine months left in 2024, trends in dealmaking will undoubtedly remain a topic of interest in the financial world. Check out “M&A in 2024: A Bounce Back Year, or Just a Blip?” for more on what to watch from M&A players.