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Global Mergers and Acquisitions in 2023
Global mergers and acquisitions are complicated, nuanced procedures that involve many stakeholders. They are not without risk, but they can also be rife with dangers. They can also transform companies and accelerate growth.
The global M&A market hit a 10-year low in 2023, as investors became increasingly worried about the impact of increasing interest rates as well as geopolitical tensions and other factors (see Chart 1). Some experts believe that activity to increase in 2024, as some of these headwinds ease.
This optimism is due to the fact that there is a queue of assets available for sale by 2024. In recent years, a lot of private equity (PE), portfolio companies haven’t sold owing to decreasing valuations. This provides buyers with a strategic opportunity to purchase assets for lower value.
Furthermore, the end of the cycle of interest rate hikes and a resurgence in the stock market will boost the availability of debt financing for acquisitions. This will lower the costs of transactions and accelerate deal closing. Additionally companies will be more likely to make use of M&A as a method of reducing the risk of geopolitical instability and expanding into new markets, sectors or revenue streams.
The back half of 2023 saw many structured transactions, including sales of earnouts and minority stakes–structures which require buyers to pay the entire purchase price only after certain operational or financial milestones are achieved after the deal is completed. This trend is likely to continue as acquirers try to align incentives and bridge the gap in their valuations.
