https://vdr-tips.blog/how-much-does-a-merger-and-acquisition-cost
Global mergers and acquisitions are nuanced, complex processes that involve a variety of stakeholders. They can be fraught with pitfalls. But they also have the power to transform businesses and accelerate their growth.
The global M&A industry reached a 10-year-low in 2023 as investors became more concerned about the ramifications 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 diminish.
One reason for this optimism is the fact that a backlog 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 could open up opportunities for strategic buyers to buy undervalued assets.
The conclusion of the cycle of interest rate increases and a rebound on the stock market will also increase the amount of debt financing available to purchase. This will lower the cost of transactions and speed the process of closing deals. M&A can also be utilized by more companies to reduce geopolitical risks and expand into new industries, markets or revenue streams.
In the second half of 2023, a variety of structured transactions were made. These included the sale of minority stakes as well as earnouts — structures that will require the buyer to pay the full cost of the deal when certain operational or financial milestones are reached after the transaction closes. This trend may continue, as acquirers seek to align incentives in a tougher context and make up the difference between their valuations.