Will Investment and M&A Growth in 2024 be fueled by AI, tech, and ESG innovations?

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The symbiotic relationship between technological advancements, sustainable practices and the relentless growth of artificial intelligence (AI) is reshaping the business world. Although in 2024, the US M&A market at large is unlikely to exceed the activity levels of 2021-2023, the rise of activity related to AI, tech and environmental, social and corporate governance (ESG) continues to grow.

Tech Titans and Startups

The tech sector remains a focal point for investments and M&A activities in the US Established tech giants (Amazon, Apple and Tesla to name a few) are engaging in strategic acquisitions to broaden their product portfolios and stay competitive. Amazon, for example, has recently announced the installation of Fire TV in all new Panasonic smart TVs in a new global partnership, as well as engaging in an in–car generative AI showcase with BMW. While Amazon continues to pave the way for voice technology, startups are reaping the benefits of a robust funding environment as investors recognize the potential for disruptive technologies.

The demand for AI tools to improve efficiency and automation is driving the advance in both investment activity and business development. Contributing to this demand are deal teams themselves, who look to AI to automate the diligence process and reduce the influence of human error across transactions.

Influence of ESG

The global shift towards sustainable business practices is influencing investment decisions more than ever. ESG considerations are now integral to the investment strategies of institutional and individual investors, with an ever-increasing demand for detailed ESG reporting. Companies with reputable ESG profiles are not only seen as responsible corporate organizations but also as secure long-term investments.

The demand from stakeholders for ESG reporting is equally evident in Silicon Valley where, despite remaining unmandated, reporting numbers continue to rise. This shift in voluntary ESG reporting is most prominent in the top 50 Silicon Valley companies. It is challenging to conclude whether the increase in ESG reporting primarily results from stakeholder demand or if it signifies proactive measures in anticipation of mandatory ESG reporting.

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The Rise of Impact Investing

Investors in 2024 are not just looking for financial returns; they are increasingly seeking investments that align with their values. This has given rise to impact investing, a strategy focused on generating positive social and environmental impact alongside financial returns. Impact investing is replacing the previous two-pocket investment approach with a three-tier focus: risk, return and impact.

A prolific example of impact investing is Patagonia’s venture fund, Tin Shed Ventures. The venture fund is committed to investing in startups helping to offset carbon emissions. A recent example included the investment into the development of the use of liquid carbon dioxide instead of water to wash clothes, helping to conserve water and use less energy as a result.

There is no denying that the intertwined forces of AI, tech and ESG are not only attracting significant investment but are also influencing the broader business ecosystem.

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