Global mergers and acquisitions form a vital part of many corporate growth strategies, allowing access to new industries, markets customers, products and technologies. They also increase financial strength through increased the size and reach. Companies must take into consideration a range of factors prior to making international acquisitions or divestitures. These include regulatory, taxation, and cultural differences.
In 2024, the challenges of the capital markets and uncertain macroeconomic conditions have weighed on deal activity. We anticipate M&A activity to pick up in 2024 as capital markets and macroeconomic conditions improve.
M&A can be driven by strategic goals, such as digital innovation and consolidation. AI, predictive robots, and smart factories, for example are enhancing manufacturing efficiency in the industrial sector.
To expand the market and increase the customer base, it is necessary to buy companies offering similar products or service across different geographical markets. This is referred to as market extension. A prime example is when PepsiCo bought Pizza Hut to significantly boost its sales of soft drinks.
M&A trends include shifting to lessen the risk of geopolitical instability and focusing on areas with better market outlooks, and investing in vertical integration and enhancing supply chain resilience. As cash and debt become scarcer buyers are expected to make use of complex structures, such as stock exchanges, minority stakes sales, and earnouts, to bridge valuation gaps. This could involve using private equity funds to make the deal feasible.