Global mergers and purchase are crucial to the many corporate strategies to grow. They allow access to new markets industries, customers, products, and technologies. They also boost the power of financial transactions through increased the size and reach. Companies must consider a variety of factors before making international acquisitions or divestitures. These include taxation, regulatory issues, and cultural differences.
In 2024, the uncertainties of capital markets and uncertain macroeconomic circumstances affected deal activity. We anticipate M&A activity to pick up in 2024 as the capital markets and macroeconomic conditions improve.
M&A can be triggered by other strategic objectives such as consolidation or digital innovation. AI predictive robots, AI, and smart factories, for instance are enhancing manufacturing efficiency in the industrial sector.
To expand the market and increase the customer base, it is important to acquire companies that offer similar products or services in different markets. This is referred to as market extension. One example of this is when PepsiCo bought Pizza Hut to significantly boost its soft drink sales.
M&A trends are also shifting to reduce increased geopolitical risks by focusing on sectors with better market prospects, investing in vertical integration, and enhancing supply chain resilience. As cash and debt become scarcer buyers are expected to employ complex structures like stock exchanges, minor stakes sales, and earnouts, to fill in the valuation gaps. This could involve using private equity funds to make the deal feasible.
