Upcoming Deal Trends

Published in 22 de outubro de 2023 by

In April, L’Oreal signed a deal to buy beauty brand Aesop. Hewlett Packard Enterprise made a $500 million acquisition of Israeli cloud security firm Axis. And U.S. midstream company Energy Transfer merged with Lotus Midstream Operations for $1.45 billion. Commentators predict these and other deals will increase M&A activity in the second quarter of 2023.

However, the underlying conditions are slowing deal-making. Inversion of the yield curve in which short-term debt instruments are more profitable than longer-term bonds, is unsustainable. Rising interest rates are making it less attractive to borrow money and also shifting the focus of a lot of firms to internal initiatives rather than M&A. And global volatility is putting off potential acquirers.

A growing emphasis on ESG issues (environmental Social and Governance) is a different force which will affect the future of M&A. As these issues are integrated into the strategic agenda of more CEOs as they become more prominent, they’re likely drive M&A which includes acquisitions and divestitures of assets with the aim of reducing their environmental footprint.

Lastly, the M&A landscape is going through a further change as companies seek partners that are closer to their main business objective. Particularly, M&A is expected to continue to increase in sectors where supply chain disruptions are accelerating and the need for vertical integration is becoming more pressing. This includes information and communication technology (ICT) medical technology, fintech, food, manufacturing and the automotive industry. Consolidation is also likely to continue in areas that have seen high valuations due to startup success. This will include sectors like artificial intelligence, augmented reality, telemedicine, and blockchain.