Global mergers and acquisitions form a vital element of many growth strategies, providing access to new industries, markets customers, products and technologies. They also increase the financial power of a company through greater scale and reach. Companies must take into account a variety of factors before making international acquisitions or divestitures. These include regulatory, taxation, and cultural differences.
In 2024, the uncertainties of the capital markets and uncertain macroeconomic situations affected deal activity. We anticipate M&A activity to increase in 2024 as capital markets and macroeconomic conditions improve.
M&A can be triggered by other strategic objectives, such as digital innovation or consolidation. For instance, rapid advances 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 essential to purchase companies offering similar products or services in different geographical markets. This is known as market extension. PepsiCo bought Pizza Hut in order to increase its sales of soft drinks.
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 building the resilience of supply chains. As the supply of cash and debt decreases we expect buyers and sellers to embrace complex structures to bridge valuation gaps, like stock swaps, minority stake sales and earnouts. This could mean using private equity investment funds to make the deals feasible.
