Global mergers and acquisitions form a vital element of many growth strategies, providing access to new industries, markets customers, products, and technologies. They also increase the financial strength of companies through greater the size and reach. However businesses must be aware about a variety of issues when making international acquisitions and divestitures, from taxation to regulatory issues to cultural differences.
In 2024, issues in the capital markets as well as uncertain macroeconomic conditions have weighed on deal activity. We expect M&A activity to increase in 2024 when capital markets and macroeconomic conditions improve.
M&A can also be driven by strategic goals, such as digital innovation and consolidation. AI robotics, predictive robots and smart factories, for instance are enhancing manufacturing efficiency in the industrial sector.
To expand the market and increase the client base, it’s important to buy companies offering similar products or services in different geographic markets. This is referred to as market extension. A good example of this is when PepsiCo bought Pizza Hut to significantly boost its sales of soft drinks.
M&A trends include a shift towards reducing increased geopolitical risk by focusing on markets that have better prospects, investing in vertically, and improving the resilience of supply chains. In addition, as the amount of debt and cash available decreases we expect sellers and buyers to take on complex structures to bridge valuation gaps, like stock swaps, minority stake sales and earnouts. This could involve using private equity investment funds to make deals viable.