Global mergers and purchases are essential to the many corporate strategies to grow. They provide access to new markets, industries, customers, products and technologies. They also increase the strength of your financials through a greater the size and reach. However, companies must be mindful of a variety of aspects when making international acquisitions and divestitures, ranging from taxation and regulatory issues to cultural differences.
In 2024, the uncertainties of capital markets and uncertain macroeconomic environment caused a lot of deal activity. However, we expect M&A to pick up in the second half of the year as these headwinds recede and the results of various elections are known.
M&A can be triggered by strategic objectives such as consolidation and digital innovation. For example, rapid developments in AI, predictive robotics, and smart factories are boosting efficiency in the industrial sector.
To expand the market and increase the customer base, it is important to acquire companies with similar products or service in different geographical markets. This is known as market extension. A good example of this is when PepsiCo purchased Pizza Hut to significantly boost its soft drink sales.
M&A trends can also be influenced by shifting strategies to combat the risk of geopolitical instability, focusing on sectors with better market prospects, investing in vertical integration and enhancing supply chain resilience. Additionally, as the availability of debt and cash decreases, we expect sellers and buyers to take on complex structures to bridge the gap in valuations, such as stock swaps or minority stake sales as well as earnouts. This may include using private equity investment funds to make deals viable.