Global mergers and acquisitions are complicated intricate, nuanced processes that involve many parties and prone to dangers. They can also transform businesses and accelerate growth.
The global M&A market hit the lowest level in 2023 as investors grew increasingly worried about the impact of rising rates of interest and geopolitical tensions, among other factors (see Chart 1). However, some experts predict growth to pick up in 2024 as a portion of these headwinds diminish.
This optimism is due to the fact that there is a queue of assets that are available for sale in 2024. In recent years, a number of private equity (PE), portfolio companies haven’t sold due to decreasing valuations. This opens up opportunities for strategic buyers who want to acquire undervalued assets.
The closing of the cycle of interest rate hikes and a resurgence in the stock market will also increase the number of loans available for acquisitions. This will lower the cost of transactions and speed the time to complete deals. M&A will also be used by more companies to mitigate geopolitical risks and expand into new industries, markets or revenue streams.
In the second half of 2023, numerous deals that were structured were concluded. These included the sale of minority stakes, as well as earnouts, which will require the buyer to pay the full cost of the deal if certain financial or operational milestones are met after the transaction closes. This trend may continue, as buyers attempt to align incentives in a tougher environment and overcome the gap between their valuations.