Global mergers and purchases are an important part of the many corporate strategies to grow. They allow access to new markets and industries, customers, products, and technologies. They also boost the power of financial transactions through increased scope and impact. 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 challenges of capital markets and uncertain macroeconomic situations weighed heavily on deal activity. We anticipate M&A activity to increase in 2024 as the capital markets and macroeconomic conditions improve.
M&A can be driven by strategic objectives like consolidation and digital innovation. For instance, rapid developments in AI predictive robotics, predictive robotics and smart factories are driving manufacturing efficiencies in the industrial sector.
To expand the market and increase the customer base, it is essential to acquire companies with similar products or services in different markets. This is referred to as market extension. An 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 geopolitical risk by focusing on markets that have better outlooks, investing vertical integration, and strengthening supply chain resilience. As cash and debt become more scarce buyers are expected to employ complex structures including stock exchanges, minority stakes sales, as well as earnouts, to bridge valuation gaps. This could involve using private equity funds to make the deal feasible.