Global mergers and acquisitions are an an important part of many strategies for growth in corporations. They give access to new markets, industries, customers, products and technologies. They also boost the power of financial transactions through increased size Acquisition cost formula and reach. Companies must consider a variety of factors before making international acquisitions or divestitures. These include taxation, regulatory concerns and cultural differences.
In 2024, challenges in the capital markets as well as uncertain macroeconomic conditions weighed down deal activity. However we anticipate M&A to pick up in the second portion of the year as these headwinds recede and the results of various elections are widely known.
M&A can also be driven by strategic goals like consolidation and digital innovation. For example, rapid developments in AI predictive robotics, predictive robotics and smart factories are boosting manufacturing efficiency in the industrial sector.
A key strategy is to acquire companies in different geographic markets with similar products or services to increase the reach of their customers and market. This is known as market extension. PepsiCo bought Pizza Hut in order to increase its sales of soft drinks.
M&A trends can also be influenced by shifting strategies to combat increased geopolitical risks and focusing on areas with more favorable market outlooks, as well as investing in vertical integration and enhancing supply chain resilience. As the amount of debt and cash available decreases we expect buyers and sellers to embrace more complex structures in order to bridge valuation gaps, like stock swaps as well as minority stake sales and earnouts. This could involve using private equity investment funds to make deals feasible.
