Global mergers and acquisitions are an essential part of many corporate growth strategies, providing access to new markets, industries customers, products, and technologies. They also boost the financial strength of companies through increased scale and reach. However companies should be aware of a myriad of factors when deciding on international acquisitions and divestitures, from taxation to regulatory issues to cultural differences.
In 2024, challenges in the financial markets and uncertain macroeconomic conditions weighed on deal activity. We expect M&A activity to pick up in 2024 when capital markets and macroeconomic conditions improve.
M&A can be triggered by strategic objectives including digital innovation and consolidation. AI robotics, predictive robots and smart factories, for example are enhancing manufacturing efficiency in the industrial sector.
One of the most effective strategies is to acquire companies in different geographic markets with similar products or services to expand the reach of their customers and market. This is known as market extension. PepsiCo bought Pizza Hut in order to increase sales of its soft drink.
M&A trends can also be influenced by shifting strategies to combat increased geopolitical risks, focusing on sectors with more favorable market outlooks, as well as investing in vertical integration, and enhancing the resilience of supply chains. In addition, as the availability of debt and cash decreases, we expect sellers and buyers to adopt complex structures to fill in the gaps in valuation, like stock swaps, minority stake sales and earnouts. This could include the use of private equity funds to ensure the deal is viable.
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