Global Mergers and Acquisitions in 2023

Global mergers and acquisitions are a complex and nuanced procedures that involve a variety of stakeholders and are prone to pitfalls. But, they also have the potential to transform businesses and accelerate their growth.

The global M&A market reached the lowest level in 2023 as investors grew more concerned about the effects of increasing interest rates and geopolitical tensions, among other factors (see Chart 1). Some experts believe activity to rebound in 2024 as a portion of these headwinds fade.

This optimism is due to the fact that there will be a stalemate of assets available for sale in 2024. Many private equity (PE) portfolio companies have not sold in recent years because valuations declined. This provides buyers with a chance to acquire assets at lower price.

Additionally, the conclusion of the cycle of interest rate hikes and a rise in the stock market will boost the availability of debt financing for acquisitions. This will cut down on transaction costs and accelerate deal completion. M&A can also be utilized by more companies to reduce geopolitical risks and expand into new industries, markets or revenue streams.

In the second half of 2023, a number structured transactions were completed. These included sales of minority stakes as well as earnouts — arrangements that make it mandatory for the buyer to pay the full amount of the deal in the event that certain operational or financial milestones are met following the closing. This trend could continue as acquirers attempt to align incentives in a tougher environment and close the gap between their valuations.

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