Interview: “Artificial intelligence will potentially create an M&A supercycle.”

In 2023, you predicted that global M&A activity would pick up again in 2024. So, were you right?

Erik Hummitzsch: Yes, our assessment largely turned out to be correct. Although the volume of deals declined by 17% in 2024 relative to 2023, the value of the transactions increased by 5% in this period. But a trend is clearly noticeable.

What trend?

Hummitzsch: We have seen many more megadeals with transaction volumes of more than one billion US dollars in each case. In these deals, the increase in value was even greater at 17%.

What are the main reasons for the increase in megadeals?

Hummitzsch: First and foremost, artificial intelligence (AI)! In 2024, there were 18 megadeals in the technology sector – by far the most of any sector. Second place goes to the insurance sector which recorded a ‘meagre’ six. It is quite possible that we are about to see a supercycle as far as M&A deals are concerned.

What do you mean by that exactly?

Hummitzsch: AI technology is creating a lot of movement and attracting huge amounts of capital. This leads to innovations, in particular in the digital and energy infrastructure, for example in data centres. This, in turn, increases M&A activity – and gives many players the opportunity to become active on the market themselves.

At the same time, however, AI is also a disruptive force in many cases and is calling many business models into question…

Hummitzsch: Exactly, and companies absolutely must prepare for this – ideally sooner rather than later. At the same time, they should analyse how they themselves can utilise AI to future-proof their business models. This will require radical action in some cases. That is something that this year’s CEO Survey by PwC has also highlighted.

…the annual survey of more than 4,700 CEOs worldwide.

Hummitzsch: Yes. We can see that almost four in ten of the CEOs surveyed doubt that their companies will still be competitive in ten years’ time if they remain on their current course.

Which come to mind?

Hummitzsch: Firstly, the economic policy of the new US government. The first tariffs came into effect at the end of January 2025 and further tariffs have been introduced since. It is still unclear exactly what impact the US government’s economic measures will have but they are likely to have a negative impact on global M&A activity. The fact that some industrial nations are currently experiencing political changes and the geopolitical conflicts in the Middle East and the Ukraine also lead to increased uncertainty.

Let’s take a look at inflation and interest rates. How do you assess developments here?

Hummitzsch: For the time being, inflation appears to be under control, and the major central banks – the Federal Reserve in the USA, the European Central Bank and the Bank of England – have lowered interest rates over the past few months. However, in the long run, we can expect interest rates to rise again.

What does that mean for M&A players?

Hummitzsch: They have to be prepared for these uncertainties and should always have a plan B or even a plan C for transactions. Value creation is more important than ever in M&A deals and must always remain in the focus.

It is also more important than ever before to carefully choose acquisition targets in consideration of the disruptive potential of AI. How well companies are prepared for the AI transformation is increasingly becoming a decisive factor.

But the intense pressure to restructure in many industries – such as the energy, automotive and retail sectors – also brings opportunities, doesn’t it?

Hummitzsch: Precisely! It all hinges on implementing restructuring measures intelligently – from a strategic, operative and financial point of view, and always with an eye to international developments and with in-depth sector knowledge. The fact remains that smart transactions are an effective tool for companies to reinvent themselves much faster. Therefore around 40% of CEOs plan to make at least one or two acquisitions over the coming three years.