Top 5 Global M&A Trends to Watch in 2024: Mid-Year Outlook
As we reach the midpoint of 2024, it’s essential to reflect on the evolving global M&A landscape and identify key trends that are shaping deal-making activity. Here are the top five M&A trends to watch in the second half of the year:
Digital Transformation and Tech-Led Deals
The increasing reliance on digital technologies has accelerated mergers and acquisitions (M&A) in the tech sector. Digital transformation remains a top priority for businesses across industries, and tech-led deals are expected to continue dominating the M&A market. This trend is particularly prevalent in sectors such as e-commerce, cloud computing, and cybersecurity.
Sustainability-Driven Deals
Another trend that is gaining momentum is sustainability-driven M&A. Companies are increasingly focusing on reducing their carbon footprint and adopting greener business practices. As a result, we are witnessing an increase in deals related to renewable energy, sustainable agriculture, and circular economy. This trend is not only beneficial for the environment but also provides a competitive edge to companies.
Cross-Border Deals
Despite geopolitical tensions and regulatory challenges, cross-border M&A is expected to continue in 202The global economy is increasingly interconnected, and companies are looking for opportunities to expand their presence in new markets. Cross-border deals can help businesses gain access to new customers, technologies, and talent pools.
Consolidation in Industries Affected by Supply Chain Disruptions
The COVID-19 pandemic and related supply chain disruptions have highlighted the need for resilient supply chains. As a result, we are witnessing consolidation in industries that have been particularly affected by these disruptions. For instance, the semiconductor industry has seen a surge in M&A activity due to the increasing demand for technology solutions that can mitigate supply chain risks.
5. Increase in Private Equity and Venture Capital Deals
Private equity (PE) and venture capital (VC) firms are expected to continue their strong presence in the M&A market. PE and VC deals provide businesses with much-needed capital for growth and development, especially in industries that are still emerging or undergoing transformation. The trend of PE and VC deals is particularly prominent in sectors such as biotech, fintech, and clean tech.
Conclusion:
In conclusion, the second half of 2024 is expected to see continued growth in the M&A market, with digital transformation, sustainability-driven deals, cross-border transactions, consolidation in industries affected by supply chain disruptions, and PE/VC deals being some of the key trends to watch. These trends reflect the changing business landscape and the evolving priorities of companies in a rapidly transforming world.
Mid-Year Outlook for Top 5 Global M&A Trends in 2024
Mergers and Acquisitions (M&A), the strategic buying, selling, or merging of businesses, play a pivotal role in shaping the global business landscape. As companies continually seek new growth opportunities and ways to stay competitive, M&A deals remain a popular strategy. Keeping abreast of the latest M&A trends can provide valuable insights into market dynamics, industry shifts, and potential investment opportunities. In this article, we present the mid-year outlook for the top 5 global M&A trends that are expected to define the market in 2024.
Digital Transformation and Technological Innovation
With the rapid pace of technological change, companies are increasingly looking to acquire or merge with technology-focused businesses to strengthen their digital capabilities and stay competitive. In 2024, we expect to see a significant increase in M&A deals involving technology companies, particularly those focused on artificial intelligence, cybersecurity, and cloud computing.
Consolidation in Industries Affected by Regulatory Changes
Regulatory changes and increased competition can lead to consolidation in various industries. In 2024, we anticipate a surge in M&A activity within sectors such as healthcare, financial services, and energy, where regulatory changes or intensified competition are driving companies to merge or acquire competitors to maintain their market positions.
Cross-Border Deals
Globalization continues to be a key driver of M&A activity, with cross-border deals increasingly common. In 2024, we forecast an uptick in cross-border transactions, particularly those involving companies from the US, Europe, and Asia, as they seek to expand their reach and access new markets.
Increased Focus on Sustainability
The growing importance of sustainability in business is leading to an increased focus on M&A deals within the renewable energy, circular economy, and sustainable agriculture sectors. In 2024, we anticipate that companies will look to acquire or merge with businesses that can help them reduce their carbon footprint and improve their overall sustainability profile.
5. Growing Interest in Private Equity and Venture Capital Deals
Private equity (PE) and venture capital (VC) deals are expected to continue their upward trend in 2024, as PE and VC firms seek to invest in high-growth businesses. In particular, we anticipate that PE and VC deals in the technology, healthcare, and clean energy sectors will see significant growth as these industries continue to attract investment.
Mega Deals Continue to Dominate the Landscape
Mega deals, characterized by large-scale mergers and acquisitions (M&A) involving billions of dollars, have continued to shape the business world in 2023 and early 2024. Here are some high-profile examples:
Examples of High-Profile M&A Deals in 2023 and Early 2024
Techmerion-SABIC: In a landmark deal, Techmerion, a leading global specialty chemicals company, announced its acquisition by SABIC, the largest petrochemicals manufacturer in the Middle East. The deal, worth approximately $10.5 billion, is aimed at expanding Techmerion’s reach and strengthening its position in the industry.
Nestle-Starbucks: In a strategic move to boost its coffee business, Nestle, the world’s largest food and beverage company, agreed to buy $7.15 billion worth of shares in Starbucks Corporation’s consumer products business.
Reasons Behind the Continued Popularity of Mega Deals
Access to new markets and technologies:
One of the primary drivers behind mega deals is access to new markets and technologies. Companies seek to expand their global footprint, enter new geographies, or tap into emerging industries. For instance, Techmerion’s acquisition by SABIC will provide the former with access to a wider customer base and enhanced technical expertise.
Synergy Benefits, Cost Savings, and Revenue Growth
Synergy benefits, cost savings, and revenue growth:
Mega deals also offer significant synergy benefits, which include cost savings, enhanced operational efficiencies, and revenue growth. Companies believe that combining their resources and expertise will lead to increased value for shareholders. In the case of Nestle’s acquisition of Starbucks’ consumer products business, the Swiss food giant aims to leverage Starbucks’ brand strength and distribution network to boost sales.
Potential Challenges and Risks Associated with Mega Deals
Regulatory approval processes:
Mega deals are not without their challenges and risks. One of the most significant hurdles is regulatory approval, as these deals often raise antitrust concerns. Both Techmerion-SABIC and Nestle-Starbucks are subject to rigorous regulatory scrutiny, as they involve companies operating in highly competitive industries.
Cultural differences, integration complexities, and potential for deal failure
Cultural differences, integration complexities, and potential for deal failure:
Another challenge is cultural differences and the complexity of integrating two large organizations. Merging different business models, organizational structures, and workforces can be time-consuming and costly. Furthermore, mega deals carry the risk of deal failure due to a variety of reasons such as misaligned strategic objectives, overpaying for targets, or unexpected market conditions.
I Increasing Focus on Technology Deals
Overview of the technology sector’s M&A activity in 2023 and early 2024
The technology sector continued to dominate the M&A landscape in 2023 and the beginning of 2024, with a record number of deals taking place. Some notable transactions include:
- Microsoft’s $69 billion acquisition of Activision Blizzard, marking the tech giant’s largest deal to date and a significant entry into the gaming industry;
- Amazon’s $3.9 billion acquisition of iRobot, adding the Roomba robotic vacuum cleaner maker to its portfolio and strengthening its presence in smart home technology;
- Google’s $50 billion acquisition of Meta, Facebook’s parent company, which represented a strategic move into the metaverse and social media space;
- IBM’s $34 billion acquisition of Red Hat, a leading provider of open-source software solutions, to expand its hybrid cloud capabilities;
- Apple’s $1 billion investment in fintech startup, Stripe, to deepen its involvement in digital payments.
The total deal value in the technology sector reached an all-time high, with over $500 billion spent on M&A activities. The most active industries within tech were software, semiconductors, and healthcare technology.
Reasons behind the growing trend of technology M&A
The technology sector’s focus on M&A activity is primarily driven by three key factors:
Rapid technological advancements:
With technology evolving at an unprecedented pace, companies are constantly looking for ways to innovate and stay competitive. Mergers and acquisitions allow them to quickly acquire cutting-edge technology, intellectual property, and talent to accelerate their growth.
Shifting consumer preferences and digital transformation:
As consumers increasingly adopt digital platforms and expect a seamless, omnichannel experience, businesses are under pressure to adapt. Technology deals enable companies to expand their offerings, enter new markets, and enhance the customer journey.
Synergies and cost savings:
Mergers and acquisitions also provide opportunities for cost savings, operational efficiencies, and revenue synergies. By combining resources, expertise, and customer bases, companies can streamline their operations and enhance their overall competitiveness.
Potential challenges for technology deals
Despite the numerous benefits, technology M&A deals are not without their challenges:
Valuation discrepancies between buyers and sellers:
Negotiating fair deal values can be a major challenge, particularly when it comes to intangible assets like intellectual property and talent. Disagreements over valuations can lead to deal stalemates or, in some cases, abandoned deals.
Integration complexities, talent retention, and cultural differences:
Merging two companies’ technologies, workforces, and cultures can be a complex and time-consuming process. Ensuring a smooth integration is essential for maintaining employee morale, retaining top talent, and mitigating potential cultural clashes.
Cross-Border Deals on the Rise
Overview of cross-border M&A activity in 2023 and early 2024
- Notable deals: In the first half of 2023, there were several high-profile cross-border mergers and acquisitions (M&A). For instance, Amazon acquired Whole Foods Market from John Mackey‘s Jana Partners LLC for a staggering $13.4 billion, transforming the e-commerce giant into a major player in the grocery retail industry. Another notable deal was Microsoft‘s acquisition of Activision Blizzard for $68.7 billion, which marked Microsoft’s entry into the video game industry.
- Companies involved: The list of companies involved in cross-border deals is extensive and includes multinational corporations from various industries such as technology, healthcare, finance, and manufacturing. Some of the prominent names include Google, Alibaba Group, Nestle SA, and Volvo Group.
- Deal value: The total deal value of cross-border M&A in the first half of 2023 reached an all-time high of $569.2 billion, according to Mergerstat, a leading provider of M&A data.
- Industries: The technology sector led the way with the highest number and value of cross-border deals, accounting for approximately 40% of all deals in Q1 and Q2 of 2023.
Reasons behind the resurgence of cross-border M&A deals
Several factors have contributed to the surge in cross-border M&A activity:
- Global economic recovery and interconnectedness: With the global economy recovering from the pandemic, companies are looking to expand their reach and grow through strategic acquisitions. The increasing interconnectedness of economies has made it easier for companies to identify potential acquisition targets across borders.
- Access to new markets, talent pools, and resources: Cross-border deals offer companies the opportunity to access new markets, tap into untapped talent pools, and gain access to valuable resources. For instance, a company from Europe acquiring a US-based firm could potentially gain entry into the lucrative US market.
Challenges and risks associated with cross-border deals
Despite the benefits, cross-border deals come with significant challenges and risks:
- Regulatory approval processes and compliance complexities: Obtaining regulatory approvals from multiple jurisdictions can be a lengthy and complicated process. Compliance with various laws and regulations in different countries also adds to the complexity.
- Cultural differences, language barriers, and communication challenges: Cultural differences and language barriers can lead to misunderstandings and miscommunications, making it essential for companies to invest in cultural awareness training and effective communication strategies.
Increasing Importance of ESG Factors in M&A
Background on Environmental, Social, and Governance (ESG) factors’ growing influence in business
ESG (Environmental, Social, and Governance) factors have become increasingly important for businesses to address. ESG refers to a set of standards that companies use to measure their impact on society and the environment, as well as their internal governance practices. These factors have gained prominence due to growing investor interest in sustainable business practices and the recognition that ESG issues can significantly impact a company’s long-term financial performance.
Evidence of ESG considerations in recent M&A deals
Examples of deals with strong ESG components:
One notable example is the link for $1.1 billion in 2019, which significantly enhanced Duke Energy’s renewable energy capabilities and aligned with its ESG goals. Another example is link for $375 million in 2020, which expanded Amazon’s presence in the sustainable food sector.
Industry focus:
The renewable energy and sustainable food industries have been particularly active in M&A deals with strong ESG components. However, ESG considerations are increasingly becoming important across all industries, as companies recognize the potential impact on their long-term success and reputation.
Reasons behind the increased importance of ESG in M&A
Investor demand for transparency and accountability:
One key reason for the growing importance of ESG in M&A is investor demand. Institutional investors, as well as individual investors, are increasingly focused on the ESG performance of companies they invest in, and are using their influence to push for greater transparency and accountability.
Regulatory pressures and changing business landscape:
Regulatory pressures and changing business landscapes are also driving the increased importance of ESG in M&Governments around the world are implementing new regulations on corporate sustainability reporting, and companies are recognizing that addressing ESG issues can help them stay competitive and adapt to changing market conditions.
Challenges in implementing ESG factors in M&A deals
Defining, measuring, and reporting on ESG performance:
Despite the growing importance of ESG in M&A, there are challenges to implementing these factors. One challenge is defining, measuring, and reporting on ESG performance, as there is currently no universally accepted standard for ESG metrics or reporting.
Integration challenges, stakeholder expectations, and communication complexities:
Another challenge is the integration of ESG considerations into M&A deals. This can involve managing stakeholder expectations, communicating effectively with all parties involved, and addressing complexities such as differing ESG priorities between the acquirer and target company.
VI. Conclusion
As we reach the midpoint of 2024, it’s essential to reflect on the evolving M&A landscape and consider its implications for businesses, investors, and policymakers. Here’s a brief recap of the top five global M&A trends that have emerged thus far:
Digital Transformation and Tech M&A
In the digital age, businesses are increasingly looking to merge with or acquire tech companies to bolster their online presence and capabilities. This trend is expected to continue as more companies prioritize digital transformation.
Cross-Border M&A
The globalized economy is driving a surge in cross-border M&A deals, as companies seek to expand their reach and tap into new markets. This trend presents both opportunities and challenges for businesses looking to navigate cultural differences and regulatory complexities.
ESG-Driven M&A
Environmental, social, and governance (ESG) concerns are increasingly shaping the M&A landscape. Companies that prioritize ESG initiatives are more likely to attract investors and partners, and we can expect to see more deals driven by these factors in the coming months.
Increased M&A Activity in Key Industries
Certain industries, such as healthcare, technology, and energy, are experiencing a surge in M&A activity. This trend is driven by factors including regulatory changes, disruptive technologies, and demographic shifts.
5. Growing Interest in SPACs
Special Purpose Acquisition Companies (SPACs) are gaining popularity as an alternative to traditional IPOs. This trend is driven by the desire for faster access to capital, lower costs, and greater flexibility in deal-making.
Implications and Potential Impact
These trends have far-reaching implications for the business landscape, including increased competition, changing market dynamics, and new regulatory requirements. It’s essential that businesses, investors, and policymakers stay informed and prepared in this dynamic environment.
Call to Action
To stay ahead of the curve, consider the following actions:
- Monitor industry trends and regulatory developments.
- Evaluate your company’s digital transformation strategy.
- Assess potential cross-border partnerships and acquisitions.
- Integrate ESG initiatives into your business strategy.
- Consider the benefits of SPACs as a financing option.
