Global Mergers and Acquisitions in 2023

Global mergers and acquisitions are nuanced, complex processes that involve a variety of stakeholders. They can be filled with dangers. However they also have the potential to transform businesses and boost their growth.

The global M&A industry experienced a 10-year low in 2023 as investors became increasingly concerned about the impact of rising rates, geopolitical tensions, and other factors. (See Chart 1). Some experts believe that activity will increase in 2024 as some of the headwinds subside.

This optimism is due to the fact that there will be a stalemate of assets available for sale by 2024. In recent times, a lot of private equity (PE), portfolio companies haven’t sold owing to the declining value of their assets. This creates opportunities for strategic buyers who want to acquire undervalued assets.

The closing of the cycle of interest rate increases and a recovery in the stock market will also increase the amount of debt financing available for acquisitions. This will reduce the cost of transactions and speed up deal completions. M&A can also be utilized by more companies to reduce geopolitical risks and expand into new industries, markets or revenue streams.

The back half of 2023 saw a number of structured transactions, including the sale of earnouts and minority stakes–structures which require buyers to pay out the full purchase price only when certain operational or financial milestones are achieved after the deal closes. This trend could continue as acquirers seek to align their incentives in a tougher context and make up the difference between their valuations.

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