As mergers and acquisitions regain momentum in 2024, Huntington National Bank EVP & Executive Managing Director of Credit Products Karen Davies joins Yahoo Finance Live to discuss why she believes "the deal flow is picking up."

Davies notes that the M&A landscape has been "sleepy" for the past two years. However, she expresses confidence that the impending Federal Reserve rate cuts will "bring capital back to the market," prompting an upswing in M&A activity. She points to the deal-making already witnessed in the first quarter, often "large deals", indicating "confidence in the market."

While acknowledging that the approaching election could "certainly swing things one way or the other" from a political standpoint, Davies emphasizes the pent-up demand in the M&A space, suggesting that "the window is opening for them."

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Editor's note: This article was written by Angel Smith

Video Transcript

JOSH LIPTON: The mergers and acquisitions space is starting to pick up back up in 2024 is coming after a lull in dealmaking last year. For more perspective on the M&A space, we have Karen Davies, Huntington National Bank Executive VP and Executive Managing Director of Credit Products.

So, Karen, is good to see you. You say M&A is poised here for a rebound this year. How come, Karen? What are the reasons?

Well it's been sleepy. The past two years have been sleepy. A lot has been going on, obviously.

We had some turbulence in the banking market last year, which were obviously worked our way out of. But rising interest rates have put people on the sidelines. So we believe along with Alan here that maybe three rate cuts are coming as well.

And we believe that will bring the capital back to the market. The credit markets have opened back up. The dealmaking is already started to pick up in the first quarter.

Large deals are usually an indication of confidence in the market. So we've seen some mega deals already come to market in the first quarter. So we think that is a very good indication of what could come in '24 and '25, a continuation of that trend.

Obviously, we're reliant on those rate cuts to help ignite that speed at which that moves. But I do think there's still a lot of pent up demand, whether it be private credit, whether it be bank, lending, capabilities, and capital that we have to put to work. And we're seeing it already at Huntington and our pipelines that the deal flow is picking up. Not only on the buy sell side, but also on the pitch side with our investment bank arm.

JULIE HYMAN: Do you think that the presidential election will also play into timing at all, especially because the later the rate cuts come, the closer it gets to the election? So if I'm a company looking at making an acquisition, maybe I say, well, maybe I just wait a little bit longer to go ahead out?

KAREN DAVIES Right. It certainly could. I mean, this is one of those where I'm a banker, I'm not an economist. But you know, and I would say investors might have an opportunity to make decisions based on monetary policy versus politics. But politics could certainly swing things one way or the other as we talk about personal tax implication and corporate tax implication.

But I think there's also this moment of a pretty significant one refi cliff that is coming in terms of the larger deals and leveraged finance. You've got a lot of private equity firms who have been holding deals for longer than they've wanted to. The window is opening up right now for them.

So I do think it may not come at the exact pace. If they don't hit the window by 9:30, I think they could be sitting on the sidelines waiting it out. Just like we saw in prior election cycles where they might hold off on M&A, they might hold off on CapEx to see what type of impact that might have to their business.

JOSH LIPTON: And the pick up in activity that you're expecting, are there certain sectors or industries where you would expect that to be more pronounced?

KAREN DAVIES Sure. Yeah, we're already seeing it. So at Huntington, we're headquartered in Columbus, Ohio. So feet on the street everywhere through our lending verticals. Across the country, heavy Midwest.

Now in the Carolinas. Now in Texas. Capstone is part of our investment bank.

So together, we bring all those groups together. And we're seeing it in tech and telecom health care data centers as that is sort of a substitute for a bit of the different type of tech and telecom deals that were happening before. A little safer space for commercial real estate if you want to play there in terms of tech and telecom.

We have added some capabilities around the sponsor coverage. So we have fund finance capabilities. Automotive just where we sit.

We watch them go through their cycle of supply chain. We see a lot of companies there. They seem to be doing well. But also anything sort of consumer health care seems to be picking up, too. So a little bit of everything.