Global Mergers and Acquisitions in 2023

Global mergers and acquisitions are complex and nuanced procedures that involve a variety of stakeholders, and can be prone to dangers. They can also transform companies and accelerate growth.

The global M&A industry experienced a 10-year low in 2023 as investors grew more concerned about the effects of rising rates, geopolitical tensions, and other factors. (See Chart 1). Some experts predict that activity will rebound in 2024, once some of the headwinds ease.

One reason for this optimism is that a backlog of assets is expected to come to market in 2024. Many private equity (PE) portfolio companies have not sold in recent years because their valuations fell. This could open up opportunities for strategic buyers to buy undervalued assets.

The conclusion of the cycle of interest rate hikes and a rebound on the stock market will also increase the amount of debt financing available for acquisitions. This will help reduce the costs of transactions and speed up deal completions. M&A will also be used by more companies in order to mitigate geopolitical risks and expand into new industries, markets or revenue streams.

The second quarter of 2023 witnessed many structured transactions, like sales of minority stakes and earnouts–structures that require the buyer to pay the entire purchase price only after certain operating or financial milestones are met after the deal is completed. This trend is likely to continue as buyers seek to align their incentives and bridge the gap in their valuations.

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