With inflation and interest rates easing, manufacturing investment is on the rise. Several large manufacturers have said they plan to increase capital investments and merger and acquisition deal-making in 2024, even as the economy continues through a period of slower growth. 

Datasite’s platform showed new industrial deal kickoffs rising 7% year-over-year in the fourth quarter of 2023, indicating that the global industrial pipeline is full. Deal kickoffs were up 9% from September, 2023 to February, 2024, compared with the same time a year ago. And in the first quarter of 2024, deal activity was up 19%.

So what’s driving all this interest? New U.S. laws, including the 2021 Bipartisan Infrastructure Law, 2022 CHIPS and Science Act, and 2022 Inflation Reduction Act, all of which focus on infrastructure and manufacturing, have prompted some of the activity. In addition, investment in U.S. clean technology totaled $239 billion in 2023, and manufacturers are also making significant investments in innovative technologies and reshoring of production.   

Demand for sustainability, innovation and defense are fueling increased dealmaking activity. Some manufacturers are focused on investing in automation and business processes to improve efficiency. When performing repetitive tasks, or those that require a high degree of accuracy and precision, robotics technology can improve product quality while reducing defects. The technology can also decrease equipment downtime, providing manufacturers with the ability to operate 24 hours a day, and increase worker safety in manufacturing operations.

Some manufacturers are investigating the possibilities of generative artificial intelligence. A recent report shows that most manufacturers see AI as the top technology that will significantly impact business outcomes, and 83% expect to incorporate GenAI into their operations in 2024.

Manufacturers are also investing to shore up their supply chains. Supply chain disruptions, from the global pandemic to the Russian invasion of Ukraine and Red Sea attacks on shipping, are forcing companies to diversify. Business leaders are investing in reshoring initiatives, so they can withstand shocks and recover more quickly when they occur. 

Despite these developments, completing M&A deals will still take determination. Deal completion rates dropped to 45% from 49% in 2023, a reflection of increased scrutiny and longer and more thorough due diligence processes. This trend shows no signs of slowing, as the average number of pages or content per deal on Datasite is up year-over-year by more than 40% in the first quarter.  

Other factors threatening to disrupt manufacturing and supply chains in 2024 include inflation, employment trends, upcoming elections, regulatory changes, cybersecurity concerns and natural catastrophes.

For now, successive interest rate hikes by the Federal Reserve and other central banks have been able to counter rising inflation, which should mean dealmakers can now operate with more certainty. If global M&A volumes, which are up 10% in Q1 compared with the same period a year ago, provide a further glimpse, an M&A resurgence is on its way, most likely led by industrials.

Mark Williams is chief revenue officer, Americas with Datasite.