Global Mergers and Acquisitions in 2023

Global mergers and acquisitions are complex multifaceted processes that involve multiple stakeholders and are prone to dangers. They can also transform businesses and help accelerate growth.

The global M&A market reached an all-time low in 2023, as investors became more worried about the repercussions of increasing interest rates as well as geopolitical tensions among other factors (see Chart 1). Some experts believe that the market will rebound in 2024, once some of the headwinds receding.

One reason for this optimism is that a pile of assets will come to market in 2024. Many private equity (PE) portfolio companies have not sold in recent times because their valuations fell. This will provide buyers with a strategic opportunity to acquire assets at lower price.

Moreover, the end of the interest rate-hike cycle and a recovery in the stock market will increase the amount of debt financing available for acquisitions. This will decrease transaction costs and accelerate deal completions. Additionally many companies will look to make use of M&A to aid in mitigating increased geopolitical risk and expanding into new sectors, markets or revenue streams.

The second quarter of 2023 witnessed a number of structured transactions, including sales of minority stakes and earnouts–structures which require buyers to pay the full purchase price only after certain financial or operating milestones are achieved after the deal is completed. This trend could continue as buyers attempt to align their incentives in a more challenging context and bridge the gap between their valuations.

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