Global mergers and purchases are an crucial to many corporate strategies for growth. They allow access to new markets as well as industries, customers products, and technologies. They also increase the financial strength of companies through increased the size and reach. Companies must take into consideration a range of factors prior to making international acquisitions or divestitures. These include taxation, regulatory issues and cultural differences.
In 2024, the uncertainties of capital markets and uncertain macroeconomic environment weighed heavily on deal activity. However, we expect M&A to pick up in the second part of the year when these headwinds diminish and the results of various elections are well-known.
M&A can be driven by other strategic goals such as digital innovation or consolidation. AI, predictive robots, and smart factories, for instance are enhancing manufacturing efficiency in the industrial sector.
To expand the market and expand the customer base, it’s important to acquire companies with similar products or service in different geographical markets. This is referred to as market extension. PepsiCo purchased Pizza Hut in order to boost its soft drinks sales.
M&A trends include a shift in the direction of reducing increased geopolitical risk and focusing on markets with better prospects, focusing on investing vertically and increasing resilience of the supply chain. As cash and debt become more scarce, we expect buyers to utilize complex structures, including stock exchanges, minor stakes sales and earnouts, to fill in the gap in valuation. This could include the use of private equity funds to make the deal feasible.
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