Mergers and acquisitions among financial advisory firms, which stalled during the first half of 2023, will pick up slightly for the remainder of the year, according to Acuity Knowledge Partners, a research and analysis firm based in London.

The added activity is due to a cautious optimism that financial professionals are feeling for the global economy, Acuity said in its inaugural Investment Banking and Advisory survey. The survey of firms in the U.S., Europe and Asia showed that the managers think markets will revive modestly during the second half of the year.

Seventy-one percent of those surveyed said private equity firms, which have large reserves of cash on hand, will drive added deal activity, buoyed by reasonable valuations. Digital transformations, corporate restructuring, increased cross-border activity and ESG considerations are also key factors that are expected to push deals, Acuity said.

The factors working against some deals include continued high inflation, a tightening of fiscal and monetary policies, and energy supply disruptions due to the war in Ukraine. However, 58% of the senior executives of leading investment banks and advisory firms said they expect only a mild dip in business opportunities, the survey said.

“The past few quarters have posed challenges for dealmakers worldwide with tighter monetary policy, persistent inflation and geopolitical tensions weighing on deal-making activity. The M&A market is heavily influenced by credit trends, and the current tightened credit conditions have made debt scarce and more expensive, impacting both valuations and activity levels,” Anish Ailawadi, managing director and head of investment banking at Acuity, said in a statement.

“Although the multiples for strategic M&A dipped across sectors in 2022, firms are optimistic that the technology, media and telecom sector will generate higher deal volumes this year, given the evolving artificial intelligence and big data technology landscape,” he said.

In addition to deal-making activity, the survey showed that 55% of the firm managers expect increased cost pressure this year, compared to 2022. Firms are using AI, as well as other tools, to bolster business activity, Acuity said. Firms also are placing increased importance on operational efficiency and cost optimization to achieve long-term business success.

More than 40% cited that strategic initiatives such as process re-engineering and workforce strategies are among the top activities that their firms are currently spending time on, the survey showed.

“There are many voices in the market trying to predict the future. While there’s a lot of speculation about soft landings or recessions, what bankers are telling us is that there is still value in growth companies,” Pankaj Bukalsaria, director of investment banking at Acuity, said in a statement. “Some of the changing economic conditions are prompting a renewed focus on innovation within investment banks but overall the broad macro picture is less bleak than some headlines might suggest.”