Global mergers and acquisitions form a vital element of many growth strategies, providing access to new markets, industries customers, products, and technologies. They also increase the financial strength of companies through greater size and reach. However, companies must be mindful of a myriad of factors when making international acquisitions or divestitures, from taxation and regulatory issues to cultural differences.
In 2024, the challenges of capital markets and uncertain macroeconomic conditions weighed on deal activity. We expect M&A activity to pick up in 2024, as capital markets and macroeconomic conditions improve.
M&A can be driven by other strategic goals such as digital innovation or consolidation. For instance, rapid advancements in AI predictive robotics, predictive robotics and smart factories are driving manufacturing efficiencies in the industrial sector.
A key strategy is to acquire companies from different regions that offer similar products or services in order to increase market reach and customer base. This is referred to as market extension. PepsiCo purchased Pizza Hut in order to increase sales of its soft drink.
M&A trends include a shift to mitigate the risk of geopolitical instability and focusing on markets with better prospects, focusing on investing vertically, and enhancing resilience of the supply chain. As cash and debt become more scarce buyers are expected to employ complex structures like stock exchanges, minority stakes sales, as well as earnouts, to fill in the gaps in valuation. This could mean using private equity funds to ensure the deal is viable.