Outlook by sectors

Published on July 30, 2024 by Prasanna Kumar

Technology, media and telecom to remain the primary sector driving the recovery in revenues, followed by the power, utilities and infrastructure sector. The healthcare and pharmaceuticals sector to remain resilient.

Sectors driving growth

Technology, media and telecom (TMT)

Investors remain attracted to the sector’s long-term growth story, its relative resilience amid macro headwinds and the growing integration of technology across multiple sectors such as healthcare, industrials, finance and energy. Also, strategic M&A is likely to continue and dominate the TMT dealmaking landscape in 2024.

• Generative artificial intelligence (AI) is the current area of interest. Its transformational capacity and sustainability are expected to generate novel revenue streams, shaping the TMT landscape

• The need to deploy capital and pursue strategic transactions would lay the foundation for TMT dealmaking and the readjustment of valuations in 2024

• Fintech, along with mission-critical software and AI and data-analytics, is expected to generate a high volume of transactions in 2024

• Investors and corporate acquirers are attracted to digitalisation, which has accelerated globally, because of the certainty of recurring revenue

• Furthermore, sector consolidation is expected in managed services. Cloud, IaaS, PaaS, SaaS and cybersecurity are highly lucrative areas offering deal-making opportunities

• “The top drivers of M&A activity in the TMT sector include innovative technologies such as cloud technology, robotics, AI, supply-chain automation and innovation in the sustainability space.”

Power, utilities and infrastructure

• M&A activity to remain strong in the utilities and infrastructure sector, in terms of both deal value and deal volume

• On 1 February 2024, the US Census Bureau reported that construction spending increased by 14% in December 2023 versus December 2022. The same pace of growth is likely to continue in 2024 in all major segments

• To modernise the US’s infrastructure and address repair and maintenance requirements, the 117th Congress passed a bill for infrastructure investment of over USD1.2tn from 2021 to 2030

• Higher growth and investment in the sector to invite opportunities for more fundraising and deal-making activity

• Analysts predict that US energy companies will continue to consolidate smaller firms

• With goals for reducing carbon footprint and achieving net zero in place, investors are looking for options that focus on novel energy-transition business models such as greenfield and brownfield projects

• Recent government regulations such as the US Inflation Reduction Act (IRA), Europe’s Green Deal Industrial Plan and Japan’s draft Green Transformation Act would facilitate further investments in low carbon infrastructure projects and present opportunities for more consolidation in the market

• ESG-focused deals are also expected to be in the spotlight in 2024 » Deal flow in the electric-vehicle (EV) value chain is expected to continue

• “US infrastructure spending is likely to dominate the public finance space; the primary focus of M&A deals would be to reduce carbon footprint, and private equity funds would be deployed to enhance deal flow in the EV sector”

Healthcare and pharma

• Within healthcare sub-sectors, pharma, life sciences and healthcare services remained resilient in terms of M&A activity in 2023. Deal-making opportunities are only expected to accelerate in 2024, banking on the raise in activity witnessed towards the end of 2023

• According to EY, the top 20 biopharma companies will collectively face USD180bn in sales at risk due to patent expiry from 2024 to 2028. To mitigate this, and to fill pipeline gaps, large-cap pharma companies are expected to look to acquire small and midsize biotech companies

• Several funds holding healthcare investments in their portfolios are nearing the end of their targeted holding periods

• Precision medicine and GLP-1 drugs are likely to be focus areas for M&A activity and fundraising

• MedTech is on a steep growth trajectory and is likely to attract fundraising and consolidation

• Other areas expected to be in focus include physician practice management, electronic health records (EHR) and other innovative technological developments, including AI in healthcare

• Another area with higher activity would be divestiture of non-core assets by many struggling pharma companies

• “Healthcare and large pharma will be compelled to participate in M&A deals due to the expiry of patents in the near term and close to end of life holding period for numerous healthcare companies in private equity portfolios”

Read the full survey here

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