Global mergers and acquisitions are a crucial part of many corporate growth strategies, offering access to new markets, industries, customers, products and technologies. They also increase the financial strength of companies through greater 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, the challenges of capital markets and uncertain macroeconomic conditions have weighed on deal activity. However, we expect M&A to pick up in the second portion of the year as these headwinds ease and the results of a variety of elections are well-known.
M&A can also be driven by strategic goals such as digital innovation and consolidation. AI and predictive robots and smart factories, for example are boosting manufacturing efficiency in the industrial sector.
One of the most effective strategies is to buy companies in different regions that offer similar products or services to increase the reach of their customers and market. This is known as market extension. An example of this is when PepsiCo purchased Pizza Hut to significantly boost its sales of soft drinks.
M&A trends include a shift to mitigate risks to geopolitics, focusing on markets with better prospects, investing in vertically, and enhancing supply chain resilience. As the demand for cash and debt grows buyers are expected to make use of complex structures, such as stock exchanges minor stakes sales and earnouts to bridge gaps in valuation. This could mean using private equity funds to make the deal feasible.
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