Global mergers and acquisitions are an important elements of many strategies for growth in corporations. They allow access to new markets and industries, customers, products and technologies. They also increase the financial strength of companies through increased scale and reach. However businesses must be aware of a myriad of factors when making international acquisitions and divestitures, from taxation and regulatory issues to cultural differences.
In 2024 the uncertainty of the capital markets as well as uncertain macroeconomic conditions affected deal activity. We expect M&A activity to pick up in 2024, as capital markets and macroeconomic conditions improve.
M&A can be triggered by other strategic objectives such as consolidation or digital innovation. For instance, rapid advances in AI predictive robotics, predictive robotics and smart factories are driving manufacturing efficiencies in the industrial sector.
A key strategy is to buy companies in different markets that offer similar products or services in order to increase market reach and the customer base. This is known as market extension. One example of this is when PepsiCo bought Pizza Hut to significantly boost its soft drink sales.
M&A trends can also be influenced by shifting strategies to combat increased geopolitical risks by focusing on sectors with stronger market outlooks, investing in vertical integration and strengthening supply chain resilience. Additionally, as cash and debt availability shrinks we expect sellers and buyers to embrace more complex structures in order to bridge the gap in valuations, such as stock swaps, minority stake sales and earnouts. This could involve using private equity investment funds to make deals work.
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