Global mergers and acquisitions will jump 50 per cent this year as corporate confidence recovers and economic growth holds up, according to Morgan Stanley.  

Health care, real estate, and technology are among the most attractive sectors for M&A, strategists led by Andrew Sheets wrote in a report summarising a survey of Morgan Stanley equity analysts across 150 global industries.

Potential acquisition candidates include Acadia Pharmaceuticals and Lumentum Holdings in the US, as well as ITV, Aston Martin Lagonda Global Holdings, Basic-Fit NV and Eutelsat Communications in Europe, the firm said, citing quantitative screens that looked for companies with similar characteristics to past targets.

The headwinds that curbed deal-making in 2022 and 2023 – the rapid increase in borrowing, concern about a recession, declines in equity markets – have eased, the strategists wrote. Now, global equity markets are rallying, high–yield bond issuance is up and corporate cash levels are high, they said. 

“We think that 2021-23 saw far less activity than fundamental and macro factors would suggest, supporting a multiyear catch-up,” the strategists wrote.

Half of the surveyed analysts said they expect M&A activity will increase in the sector they cover in the next 12 months, 39 per cent think it will remain unchanged, and very few expect it to deteriorate further, the strategists wrote. Analysts in North America and Europe were the most bullish, with 63 per cent of those in North America and 67 per cent in Europe seeing an increase in activity over the next year.

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Recession risk and regulation are among the biggest hurdles to deals, the Morgan Stanley analysts predicted. BLOOMBERG