Global mergers and acquisitions are an essential transaction rooms component of many corporate expansion strategies, giving access to new industries, markets, customers, products and technologies. They also improve financial strength through increased size and reach. Companies must take into account a variety of factors prior to making international acquisitions or divestitures. These include taxation, regulatory concerns, and cultural differences.
In 2024 the complexities of financial markets and uncertain macroeconomic environment have weighed heavily on deal activity. We expect M&A activity to increase in 2024 as capital markets and macroeconomic conditions improve.
M&A can be triggered by other strategic goals, such as consolidation or digital innovation. For instance, rapid advances in AI as well as predictive robotics and smart factories are boosting efficiency in the industrial sector.
One of the most effective strategies is to buy companies in different geographic markets with similar products or services, to expand market reach and the customer base. This is known as market extension. PepsiCo bought Pizza Hut in order to increase sales of its soft drink.
M&A trends also include shifting to mitigate the risk of geopolitical instability, focusing on sectors with better market outlooks, and investing in vertical integration and strengthening the resilience of supply chains. As the supply of cash and debt becomes more scarce we expect buyers to employ complex structures including stock exchanges, minor stakes sales and earnouts, to bridge gap in valuation. This may include using private equity investment funds to make the deals feasible.