Global Mergers and Acquisitions in 2023

Global mergers and acquisitions are complex, nuanced processes that involve multiple stakeholders. They can be filled with pitfalls. They can also transform companies and help accelerate growth.

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

One reason for this optimism is that a backlog of assets will come to market in 2024. Many private equity (PE) portfolio companies have not sold recently due to the fact that valuations have dipped. This provides buyers with a chance to acquire assets at lower value.

Furthermore, the end of the interest rate-hike cycle and a rise in the stock market will increase the number of loans available for acquisitions. This will cut down on transaction costs and accelerate deal completion. M&A can also be used by more companies in order to mitigate geopolitical risks and expand into new industries, markets or revenue streams.

The back half of 2023 saw many structured transactions, including sales of earnouts and minority stakes–structures which require buyers to pay the entire purchase price only after certain operating or financial milestones are met once the deal closes. This trend is likely to continue as acquirers attempt to align incentives and close the gap in their valuations.

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