2023 saw mergers and acquisitions dip somewhat as markets faced the Fed’s battle against inflation as well as fear-inducing events like the mini bank crisis in May. After a dim 2023, 2024 could see M&A activity brighten, instead. With key trends boosting M&A activity, then, it may be worth looking at how active investing can help.
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Why lean on active investing to benefit from M&A activity increasing? Active managers, of course, consider fundamentals when looking at firms. Active ETFs leverage managers’ significant experience and seasoned management in assessing firms and the spaces stand out as key parts of active’s appeal.
At the same time, however, active investing also empowers active ETFs and their managers to respond to events. It may not always be advisable to only invest in a firm because it gets involved in a merger or acquisition. However, M&A often boosts a firm’s outlook and introduces a near-term boost to its values. A capable active manager can find the positives in an overarching trend of growing M&A.
So where is that M&A boost coming from? Strength in corporate balance sheets and improving outlooks for financing stand out as major factors. Significant dry powder in the market, to the tune of some $1.9 trillion, could also come off the sidelines. Private equity could dive back in as well, providing capital for those firms looking to get into M&A activity.
Investors who want to ride a potential M&A wave, then, may want to look to active funds. Active ETFs like those at T. Rowe Price, for example, present one intriguing toolset. Strategies like the T. Rowe Price Growth Stock ETF (TGRW) may be worth looking at for investors considering active equity strategies. Taken together, active investing provides a solid route into benefitting from M&A compared to less agile passives.
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