Global mergers and acquisitions are an essential to many corporate strategies for growth. They open up access to new markets and industries, customers, products, and technologies. They also boost financial strength through increased size and reach. However, companies must be mindful of a variety of aspects when deciding on international acquisitions and divestitures, from taxation to regulatory issues to cultural differences.
In 2024, the uncertainties of capital markets and uncertain macroeconomic environment caused a lot of deal activity. However, we expect M&A to pick up in the second part of the year when these headwinds recede and the results of various elections are known.
M&A can be driven by strategic objectives including digital innovation and consolidation. AI and predictive robots and smart factories, for instance are enhancing manufacturing efficiency in the industrial sector.
To expand the market and expand the customer base, it’s important to buy companies offering similar products or services in different markets. This is referred to as market extension. PepsiCo bought Pizza Hut in order to increase its sales of soft drinks.
M&A trends also include shifting to mitigate increased geopolitical risks, focusing on sectors with stronger market outlooks, investing in vertical integration and strengthening supply chain resiliency. As the supply of cash and debt becomes more scarce buyers are expected to utilize complex structures, such as stock exchanges, minor stakes sales and earnouts, to bridge valuation gaps. This could mean using private equity funds to make the deal financially viable.
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