Global mergers and purchases are complex, nuanced processes that involve a variety of stakeholders. They can be fraught with pitfalls. They can also transform companies and accelerate growth.
The global M&A market hit an all-time low of 10 years in 2023, as investors became more concerned about the effect of rising rates of interest as well as geopolitical tensions and other factors (see Chart 1). Some experts predict that activity will rebound in 2024, as some of the headwinds ease.
This optimism is due to the fact that there will be a backlog of assets available for sale by 2024. In recent times, a lot of private equity (PE) portfolio companies haven’t sold because of decreasing valuations. This will provide buyers with a strategic opportunity to purchase Capital raising process assets at lower value.
Furthermore, the end of the cycle of interest rate hikes and a rebound in the stock market will boost the number of loans available for acquisitions. This will decrease the cost of transactions and speed up completions. M&A will also be used by more companies to mitigate geopolitical risks and expand into new markets, industries or revenue streams.
The back half of 2023 saw many structured transactions, including the sale of earnouts and minority stakes, which are structures which require buyers to pay out the full purchase price only if certain operating or financial milestones are met following the transaction is completed. This trend may continue, as buyers attempt to align incentives in a more competitive context and close the gap between their valuations.