Global Mergers and Acquisitions in 2023

Global mergers and purchases are intricate, complicated processes which involve multiple stakeholders. They are often fraught with pitfalls. They can also transform businesses and speed up growth.

The global M&A industry experienced a 10-year low in 2023, as investors became more concerned about the effects of rising rates, geopolitical tensions and other factors. (See Chart 1). However, some experts predict growth to pick up in 2024 as some of these headwinds recede.

One reason for this optimism is that there is a backlog of assets will be brought to market in 2024. In recent years, a number of private equity (PE) portfolio companies haven’t sold because of declining valuations. This will create opportunities for strategic buyers to buy undervalued assets.

The end of the cycle of interest rate increases and a rebound on the stock market will increase the availability of debt finance for acquisitions. This will lower transaction costs and accelerate deal finalization. In addition businesses will continue to use M&A as a method of mitigating increased geopolitical risk and expanding into new sectors, markets or revenue streams.

In the second half of 2023, several structured transactions were concluded. These included sales of minority stakes as well as earnouts — structures that allow the buyer to pay for the entire cost of the deal if certain operational or financial milestones are met after the transaction has closed. This trend will likely to continue as acquirers attempt to align their incentives and close the gap in their valuations.

Acquisition cost formula