The first quarter is set to record the highest number of large M&A deal announcements in nearly two years.

February marked the third straight month in which four global M&A deals were announced with transaction values greater than $10 billion. With eight such deals through the first two months, the first quarter is likely to have the highest number of $10 billion-plus transactions since the second quarter of 2022, when 11 were announced.

The pickup in large deals has brought a bit of measured optimism to the investment banking business. "We've seen some encouraging signs recently, but in the big picture, there's still some challenges there," JPMorgan Chase & Co. CFO Jeremy Barnum said Feb. 27 during an investor conference presentation.

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Under the microscope

Among the challenges that Barnum highlighted include geopolitical concerns and the regulatory environment, which has increased scrutiny and prolonged approval times for some M&A transactions. "Those are not the most conducive things for M&A," Barnum said.

Antitrust concerns have been raised in at least two of the $10 billion-plus deals announced in February.

Executives at pharmaceutical giant Eli Lilly and Co. said the proposed $16.45 billion sale of pharmaceutical manufacturer Catalent Inc. to Novo Holdings A/S raises competitive questions. Novo and Eli Lilly are both clients of Catalent, which plays a key development role in the industry, Eli Lilly CFO Anat Ashkenazi said during an investor conference call in February. Ashkenazi said his company plans to hold Catalent accountable for its contract with Eli Lilly and is trying to gain more information on the deal between Novo and Catelent.

"Our focus today is on ensuring that continuity of supply of medicine for patients is uninterrupted," Ashkenazi said during the investor call.

Capital One Financial Corp.'s $35.34 billion deal for Discover Financial Services quickly gained the attention of lawmakers who expressed concern. Observers said the deal will likely lead to a challenging antitrust review given the sheer size of the transaction, which ranks as the largest M&A announcement in 2024, and that it will combine two consumer-facing lenders.

"We expect that there'll be a good level of scrutiny on the process," Jeff Norris, senior vice president of finance at Capital One, said during an investor conference presentation. "But we feel like we're in a pretty strong position to navigate the approval process."

Positive sign

Even though some deals are expected to face reviews, the transaction announcements are a positive sign for activity.

Bill Curtin, global head of the M&A practice at law firm Hogan Lovells, said the recent uptick in large deals indicates that companies are getting used to the more restrictive antitrust guidelines. Curtin said the transactions might face litigation, longer closing times and increased costs. Pursuing the transactions shows that companies view the positives of M&A as outweighing the negatives.

"Confidence with respect to how to work constructively with the regulators means M&A rises in 2024," Curtin said on the latest edition of the Pipeline podcast. "And ... $10 billion-plus, $20 billion transactions, those start to return, as you've seen."