Global mergers and acquisitions are a crucial element of a variety of corporate expansion strategies, giving access to new industries, markets, customers, products and technologies. They also boost financial power through increased scale and reach. However companies should be aware of a range of factors when deciding on international acquisitions and divestitures, ranging from taxation and regulatory issues to cultural differences.
In 2024, issues in the capital markets as well as uncertain macroeconomic conditions weighed down 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 consolidation or digital innovation. For example, rapid developments in AI, predictive robotics, and smart factories are driving efficiencies in manufacturing in the industrial sector.
To expand the market and expand the customer base, it is important to acquire companies that offer similar products or services in different geographic markets. This is known as market extension. A good example of this is when PepsiCo bought Pizza Hut to significantly boost its soft drink sales.
M&A trends include a shift to mitigate increased risk from geopolitical events, focusing on markets with better prospects, focusing on investing vertically, and enhancing resilience of the supply chain. As cash and debt become scarcer we expect buyers to utilize complex structures, like stock exchanges, minority stakes sales, as well as earnouts, to bridge valuation gaps. This may include using private equity investment funds to make deals feasible.
