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Time for Merger & Acquisition ETFs With Deal-Making Staging a Comeback?
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The merger & acquisition (M&A) market has experienced significant volatility, from the pandemic-induced downturn in 2020 to a remarkable recovery in 2021, followed by a sharp decline in 2023. Global M&A activity in 2023 dropped 16% to $3.1 trillion, per Mckinsey. The performance was weaker than that was seen in the pandemic year 2020.
IQ Merger Arbitrage ETF (MNA - Free Report) has added about 4.6% so far this year compared with 20.6% gains in the SPDR S&P 500 ETF Trust (SPY - Free Report) (as of Sept. 25, 2024). Meanwhile, AltShares Merger Arbitrage ETF (ARB - Free Report) added 3.9% this year. ProShares Merger ETF (MRGR - Free Report) has advanced 4.1% this year.
Optimism Ahead?
Several factors contribute to a positive outlook for M&A in 2024: improving financial markets due to easing inflation and interest rate cuts, pent-up demand for deals, and strategic initiatives taken by companies to adapt and transform their business models, per PWC.
About 60% of CEOs plan to sign one deal in the next three years, per a PWC survey. Private capital has almost $4tn of “dry powder” — capital that needs to be deployed or returned to limited partners. At the same time, private capital has about $12 trillion of assets under management (AUM), almost double the amount in 2019 (read: M&A to Bounce Back in 2024? ETFs in Focus).
Jefferies Financial Group (JEF) reported its third-quarter results on Wednesday, showing a promising rebound in investment banking activity. The firm’s investment banking fees surged by 47% year-over-year and 18% from the previous quarter. Although these figures fell slightly short of analysts' expectations, Jefferies' stock remains up 53% year-to-date, signaling renewed optimism, as quoted on Yahoo Finance.
Jefferies posted strong results in its M&A advisory operations, with revenues jumping 108% to $592 million. Overall, its total investment banking fees climbed to $949 million. However, revenues from IPO underwriting dipped slightly by 2.6%.
Early Signs From Big Banks
Several large banks have pointed to positive investment banking results for the third quarter. Citigroup CFO Mark Mason projected a 20% year-over-year increase in fees, while JPMorgan's COO Daniel Pinto expected a 15% rise. The first half of 2024 witnessed gains in mergers and acquisitions (M&A), initial public offerings (IPOs), and debt underwriting.
What Lies Ahead?
Goldman Sachs CEO David Solomon expressed some surprising concern over slow deal flow from the private equity sector. However, he remains hopeful that private equity activity will pick up through the rest of 2024 and into 2025, adding to a broader investment banking recovery, as quoted on Yahoo Finance.
Any Concern?
Uncertainty in the macroeconomic scenario (due to the presidential election in the United States) and geopolitical crises raise the importance of risk assessment in deal-making.
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Time for Merger & Acquisition ETFs With Deal-Making Staging a Comeback?
The merger & acquisition (M&A) market has experienced significant volatility, from the pandemic-induced downturn in 2020 to a remarkable recovery in 2021, followed by a sharp decline in 2023. Global M&A activity in 2023 dropped 16% to $3.1 trillion, per Mckinsey. The performance was weaker than that was seen in the pandemic year 2020.
IQ Merger Arbitrage ETF (MNA - Free Report) has added about 4.6% so far this year compared with 20.6% gains in the SPDR S&P 500 ETF Trust (SPY - Free Report) (as of Sept. 25, 2024). Meanwhile, AltShares Merger Arbitrage ETF (ARB - Free Report) added 3.9% this year. ProShares Merger ETF (MRGR - Free Report) has advanced 4.1% this year.
Optimism Ahead?
Several factors contribute to a positive outlook for M&A in 2024: improving financial markets due to easing inflation and interest rate cuts, pent-up demand for deals, and strategic initiatives taken by companies to adapt and transform their business models, per PWC.
About 60% of CEOs plan to sign one deal in the next three years, per a PWC survey. Private capital has almost $4tn of “dry powder” — capital that needs to be deployed or returned to limited partners. At the same time, private capital has about $12 trillion of assets under management (AUM), almost double the amount in 2019 (read: M&A to Bounce Back in 2024? ETFs in Focus).
Jefferies Financial Group (JEF) reported its third-quarter results on Wednesday, showing a promising rebound in investment banking activity. The firm’s investment banking fees surged by 47% year-over-year and 18% from the previous quarter. Although these figures fell slightly short of analysts' expectations, Jefferies' stock remains up 53% year-to-date, signaling renewed optimism, as quoted on Yahoo Finance.
Jefferies posted strong results in its M&A advisory operations, with revenues jumping 108% to $592 million. Overall, its total investment banking fees climbed to $949 million. However, revenues from IPO underwriting dipped slightly by 2.6%.
Early Signs From Big Banks
Several large banks have pointed to positive investment banking results for the third quarter. Citigroup CFO Mark Mason projected a 20% year-over-year increase in fees, while JPMorgan's COO Daniel Pinto expected a 15% rise. The first half of 2024 witnessed gains in mergers and acquisitions (M&A), initial public offerings (IPOs), and debt underwriting.
What Lies Ahead?
Goldman Sachs CEO David Solomon expressed some surprising concern over slow deal flow from the private equity sector. However, he remains hopeful that private equity activity will pick up through the rest of 2024 and into 2025, adding to a broader investment banking recovery, as quoted on Yahoo Finance.
Any Concern?
Uncertainty in the macroeconomic scenario (due to the presidential election in the United States) and geopolitical crises raise the importance of risk assessment in deal-making.