CMS European M&A Study 2024: Optimism for M&A amid evolving market trends


The CMS Corporate/M&A Group is pleased to launch the 16th edition of the European M&A Study.

It's been a wild ride for mergers and acquisitions (M&A) around the world this year. Yet, despite the turbulence, we are seeing plenty of reasons to be hopeful about M&A activities in Europe for 2024. The resilience shown amidst economic and geopolitical ups and downs is truly inspiring. Our Study dives into an impressive 559 M&A deals that CMS advised in 2023 and reports on deal trends and current market standards on risk allocation.

You can download the study here.

Key findings:

  • Sustained Deal Activity: Despite geopolitical tensions and economic challenges, 2023 witnessed a resilient M&A market, with CMS advising on a record number of deals. This resilience signals a robust appetite for strategic acquisitions and a promising outlook for 2024.
  • Pricing Structures Shift: There was a notable decrease in purchase price adjustments (PPAs) and earn-outs, suggesting a move towards more stable and predictable deal structures. This trend suggests increasing confidence in valuation accuracy and financial stability. However, the reduced use of locked box structures in smaller transactions indicates lingering uncertainty regarding pricing.
  • ESG Still Emerging in Deal Considerations: While specific ESG due diligence has seen an uptick, rising to 47% from last year's 33%, the incorporation of ESG factors into deal structures remains modest. This area is expected to grow as regulatory and reputational pressures increase.
  • Rise in Strategic Investments: The study observed a significant presence of strategic investors both as buyers and sellers, indicating a strategic reshaping of business portfolios in response to evolving market conditions.
  • Risk Allocation: The standard limitation period for operational warranties, although reducing, remains between 12 to 24 months across most transactions, with liability caps below 50% of the purchase price being seen in the majority of cases, maintaining consistency with previous years.
  • W&I Insurance Stability: The utilisation of Warranty & Indemnity insurance in European deals, particularly in the larger transactions, has stayed consistent with 2022 levels, with the UK leading in its use.
  • Geopolitical and Economic Factors: The Study acknowledges the ongoing impact of geopolitical tensions and economic uncertainties on deal-making but also points to recovering confidence in the debt markets and potential boosts from election cycles.

In analysing the 2023 M&A market in Europe, we report on current market standards on risk allocation in M&A deals, comparing 2023 against 2022 and the previous 13-year average for 2010 – 2022.

The special features of this Study are as follows:

  • CMS European / US risk allocation comparison – we provide a headline analysis of the differing risk allocation on standard issues in European and US M&A.
  • CMS European regional differences – we highlight certain issues peculiar to one or more of the seven European regions covered.
  • CMS deal size analysis – we analysed our data against three different deal values: firstly, deals up to EUR 25m; secondly, deals in a value range of EUR 25m to EUR 100m; and thirdly, deals exceeding EUR 100m.
  • Special Commentary from CMS offices in LATAM, China, Asia Pacific and Middle East.

We hope the CMS European M&A Study 2024 will again be a useful guide for you in a more and more challenging investment climate.

Authors: Nick Crosbie, Tobias Grau, Bruce Harvie, Yella Schick.