Global Mergers and Acquisitions in 2023
Global mergers and acquisitions are nuanced, complex processes that involve multiple stakeholders. They can be fraught with pitfalls. They can also transform businesses and help accelerate growth.
The global M&A industry reached a 10-year-low in 2023 as investors became more concerned about the ramifications of rising rates, geopolitical tensions, and other factors. (See Chart 1). However, some experts anticipate that activity to increase in 2024 when some of these headwinds recede.
This optimism is due to the fact that there is a queue of assets that can be sold by 2024. In recent years, many private equity (PE), portfolio companies haven’t sold due to falling valuations. This will create opportunities for strategic buyers to buy undervalued assets.
Moreover, the end of the interest rate-hike cycle and a resurgence in the stock market will increase the number of loans available for acquisitions. This will lower the cost of transactions and speed up deal completions. M&A can also be utilized by more companies to mitigate geopolitical risks and expand into new markets, industries or revenue streams.
The second quarter of 2023 witnessed a number of structured transactions, including sales of earnouts and minority stakes — structures which require buyers to pay the entire purchase price only when certain financial or operating milestones are met after the deal is completed. This trend is likely to continue as acquirers try to align incentives and bridge the gap in their valuations.
