Merger and acquisition (M&A) activity could be hampered this year by the regulatory environment around ESG and antitrust rules, according to a report.

ESG guidelines currently rank among the most important deal drivers, Norton Rose Fulbright’s Global M&A Trends and Risks report found, amid an overall optimistic outlook for deal activity in 2024.

However, a quarter of respondents (25%) to its survey included ESG-related regulation among the top two factors most likely to suppress deal activity in 2024. 

The vast majority of respondents (73%) also expect ESG scrutiny around the world to increase compared to last year, compounding the importance of ESG data.

Antitrust rules are likewise expected to have a pronounced suppressive effect on M&A activity, particularly in the US, EU and East Asia, the report found.

A third of dealmakers across regions say antitrust will be among the top types of regulation and policy impacting M&A activity, more than any other category.

Outside of regulations, other impediments to deal activity include the increased cost of financing, commodity price risks, geopolitical uncertainty (particularly in the Middle East), transparency issues, ESG concerns broadly and issues overcoming valuation gaps.

Despite ESG concerns, however, the report pointed to the M&A landscape recovering globally as more than half (59%) of global dealmakers surveyed expect their appetites for M&A to grow in 2024. 

Suggesting a pronounced shift in confidence, this figure includes nearly a quarter (23%) who expect their dealmaking appetites to increase significantly in the year ahead, compared to just 5% who said the same in 2023.