Global mergers and acquisitions are nuanced, complex processes which involve multiple stakeholders. They can be fraught with pitfalls. They can also transform businesses and boost growth.
The global M&A market hit an all-time low of 10 years in 2023 as investors became increasingly worried about the impact of increasing interest rates as well as geopolitical tensions among other factors (see Chart 1). Some experts believe that the market will pick up in 2024 as some of the headwinds ease.
One reason for this optimism is that there is a backlog of assets will be brought to market in 2024. Many private equity (PE) portfolio companies have not sold in recent years due to the fact that valuations have dipped. This will provide strategic buyers with the opportunity to acquire assets at lower value.
Furthermore, the end of the interest rate-hike cycle and a rise in the stock market will boost the amount of debt financing available for acquisitions. This will help reduce the cost of transactions and speed the time to complete deals. M&A can also be utilized by more companies in order to mitigate geopolitical risks and expand into new industries, markets or revenue streams.
In the second quarter of 2023, a variety of structured transactions were completed. These included the https://vdr-tips.blog/how-much-does-a-merger-and-acquisition-cost sale of minority stakes and earnouts — structures that allow the buyer to pay the full cost of the deal in the event that certain operational or financial goals are met after the transaction closes. This trend could continue as acquirers seek to align incentives in a more challenging environment and overcome the gap between their valuations.