Global Mergers and Acquisitions in 2023

Global mergers and acquisitions are a complex multifaceted processes that involve multiple stakeholders, and can be prone to pitfalls. They can also transform companies and boost growth.

The global M&A industry experienced a 10-year low in 2023, as investors were more concerned about the effects of rising rates, geopolitical tensions and other factors. (See Chart 1). Some experts believe that the market will pick up in 2024, as some of the headwinds subside.

One reason for this optimism is that there is a backlog of assets is expected to come to market in 2024. Many private equity (PE) portfolio companies have not sold in recent years due to the fact that valuations have dipped. This opens up opportunities for strategic buyers to buy undervalued assets.

Additionally, the conclusion of the interest rate-hike cycle and a resurgence in the stock market will increase the availability of debt financing for acquisitions. This will cut down on the cost of transactions and speed up finalization. M&A can also be utilized by more companies in order to mitigate geopolitical risks and expand into new markets, industries or revenue streams.

In the second quarter of 2023, numerous structured transactions were made. These included the sale of minority stakes as well earnouts — arrangements that will require the buyer to pay the full price of the deal if certain financial or operational milestones are achieved when the transaction is completed. This trend could continue as acquirers attempt to align their incentives in a tougher environment and close the gap between their valuations.

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