Global Mergers and Acquisitions in 2023

Global mergers and acquisitions are complex, nuanced processes that involve multiple stakeholders. They are not without risk, but they can also be rife with pitfalls. However they also have the potential to transform companies and accelerate their growth.

The global M&A market reached the lowest level in 2023, as investors became more concerned about the effects of increasing rates of interest and geopolitical tensions, among other factors (see Chart 1). Some experts believe that the market will pick up in 2024, when some of the headwinds ease.

This optimism is due to the fact that there is a queue of assets that are available for sale in 2024. In recent years, many private equity (PE), portfolio companies haven’t been sold due to the declining value of their assets. This will provide buyers with a chance to acquire assets at lower value.

The end of the cycle of interest rate hikes and a recovery in the stock market will increase the availability of debt finance for acquisitions. This will reduce transaction costs and speed up the process of closing deals. In addition businesses will continue to leverage M&A as a means of decreasing the risk of increased geopolitical risks and expanding into new sectors, markets or revenue streams.

In the second quarter of 2023, numerous deals that were structured were concluded. These included sales of minority stakes and earnouts — structures that require the buyer only to pay the full price of the deal in the event that certain operational or financial goals are met after the transaction has closed. This trend will likely to continue as buyers try to align incentives and close the gap in their valuations.

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