Global mergers and acquisitions form a vital part of many corporate growth strategies, allowing access to new markets, industries customers, products and technologies. They also improve financial strength through increased size and reach. Companies must take into consideration a range of factors before making international acquisitions or divestitures. These include taxation, regulatory issues, and cultural differences.
In 2024, challenges in capital markets and uncertain macroeconomic conditions 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 different elections are known.
M&A can be driven by other strategic goals, such as digital innovation or consolidation. AI robotics, predictive robots and smart factories, for instance, are driving manufacturing efficiency in the industrial sector.
One of the most effective strategies is to buy companies in different geographical markets that have similar products or services in order to increase the reach of their customers and market. This is known as market extension. PepsiCo purchased Pizza Hut in order to increase sales of its soft drink.
M&A trends include shifting to lessen increased geopolitical risks, focusing on sectors with better market outlooks, and investing in vertical integration, and enhancing supply chain resilience. As cash and debt become more scarce buyers are expected to use complex structures, such as stock exchanges minor stakes sales and earnouts, to bridge valuation gaps. This could mean using private equity investment funds to make deals work.
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