2023 was a rough year for mergers and acquisitions, with economic uncertainty and higher interest rates forcing many companies to put their M&A plans on the back-burner. But that's going to change in 2024, according to Solomon Partners CEO Marc Cooper.

Cooper predicts "better" activity in the space, noting "mega-transactions that maybe skewed the dollar volume" of M&A in 2023.

Cooper notes that private equity has "been on the sidelines." He expects that with interest rate stability, a release of pent-up demand, and the need to return capital investors, private equity will be more active in the M&A space in 2024.

On the corporate side, Cooper says M&A can create growth in a time of low-growth for the economy. He also notes that companies are sitting on a lot of cash that they can deploy.

How is Cooper so confident about M&A activity picking up? He notes that his firm is seeing a backlog of transactions and increased pitch counts.

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Editor's note: This article was written by Eyek Ntekim

Video Transcript

- So Marc then what do you think activity is going to look like this year? If you do get your wish list or your wish case, I guess, is a better way to say it. At this point, what do you think activity is going to look like between now and the end of the year?

MARC COOPER: Better.

- Not great.

- So last year was a tough year. And it was a tough year by historic standards. Now we had some mega transactions that may be skewed the dollar volume of M&A, which I think was only down 7.5% in the US. But when you look at deal count, it's down almost 20%. If you look at middle market PE is almost down 40% in deal count.

So those are some pretty significant numbers. In particular, the PE community has been on the sideline for quite some time. So I think when you look at the combination of rates stabilizing, so people could price risk with some certainty, with the idea that the PE has some pent-up-- some pent-up demand both to make acquisitions and to return capital to their investors, and that requires transactions.

And then the last piece which is interesting is what drives corporate mergers. And you have a few things going on with a slowing economy or a more stable low-growth economy M&A becomes an important way of creating growth. I think you'll see more corporate transactions.

The second piece, which is cash balances. Cash balances are up, I think, it was like 40 plus percent of the S&P 500 over the past number of years. So there's some big dollars sitting on the sideline. You couple that with a more agreeable financing market, and you've got some positive ingredients that should drive M&A.