Global mergers and acquisitions form a vital element of a variety of corporate growth strategies, offering access to new markets, industries customers, products and technologies. They also increase the strength of your financials through a greater scale and reach. Companies must take into consideration a range of factors before making international acquisitions or divestitures. These include taxation, regulatory issues and cultural differences.
In 2024, the challenges of the financial markets and uncertain macroeconomic conditions have weighed on deal activity. We expect M&A activity to increase in 2024 as the capital markets and macroeconomic conditions improve.
M&A can be driven by strategic goals like digital innovation and consolidation. AI robotics, predictive robots and smart factories, for instance, are driving manufacturing efficiency in the industrial sector.
To expand the market and increase the client base, it’s important to acquire companies that offer similar products or services in different geographical markets. This is called market extension. A good example of this is when PepsiCo purchased Pizza Hut to significantly boost its sales of soft drinks.
M&A trends include shifting to lessen increased geopolitical risks and focusing on sectors that have more favorable market outlooks, as well as investing in vertical integration and enhancing the resilience of supply chains. As cash and debt become more scarce, we expect buyers to employ complex structures such as stock exchanges, minority stakes sales, as well as earnouts, to fill in the valuation gaps. This may include using private equity investment funds to make the deals viable.