Global M&A in 2024: Anticipated Trends, Evolving Business Models, and Nearshoring Strategies

Introduction

Entering the year 2024, the?global?business arena?demonstrates?a fusion of?upcoming M&A?activity, technological progress, and evolving?business models. Within this framework, the impact of strategic nearshoring?efforts?further contribute to the complex structure of the global business landscape. This article?dives?into the integration of these?different?trends, offering a holistic perspective for businesses this year.?

Trends and Growth Areas

In 2024, M&A is due for a comeback. A record $1.9 trillion of dry powder needs to be deployed, private equity firms need to monetize their older assets, and CEOs are feeling more enthusiastic about deal activity. According to EY-Parthenon’s CEO Outlook Survey, “over the next 12 months, 52% of US CEOs plan M&A.” Certain sectors have already started to see a rebound such as energy, pharma, and technology.?As dealmaking picks up,?specific trends?are?expected to take the spotlight including technological disruption and digital transformation. Companies will continue to prioritize?artificial intelligence capabilities and blockchain, reflecting a broader push for enhanced digital capabilities in order to keep up with evolving business models. Digital technologies and cloud computing can help acquirers streamline business integrations, maximizing efficiency of bringing together multiple systems following an acquisition. Additionally, analytics informed by AI and data strategies can provide actionable insights for management teams, allowing executives to make more informed and efficient decisions, and potentially optimize cost structures. AI can also help streamline dealmaking and acquisition activity, creating more opportunities for acquirers using AI analytics to identify potential M&A targets, carry out components of due diligence processes, and manage and track closing processes.

Additionally,?learning from the consequences of the pandemic and ongoing geopolitical conflicts, companies are increasing turning to?nearshoring strategies,?as?businesses?seek?to optimize supply chains and enhance operational resilience by relocating operations?closer to their respective end markets.

Globalization and Nearshoring

Despite geopolitical uncertainties,?globalization remains a key driver of M&A, accentuated by the influence of interest rates and a?surge in nearshoring strategies.?For decades, companies have maintained manufacturing operations in far away global locations to take advantage of cheaper labor and shipping costs. However with recent heightened volatility arising from the pandemic and a number of ongoing global conflicts, supply chains have been negatively impacted and companies are starting to more heavily prioritize having critical operations closer to their end markets.?Nearshoring involves relocating?key?operations to nearby countries,?still taking advantages of lower costs, but benefiting from proximity to home and major end markets as well as greater cultural alignment.?This trend is particularly?important to?industries?such as?manufacturing?and automotive, where?supply chains are critical to the success of a business, and disruptions can have severe and cascading effects.

As businesses?figure out how to best handle?and prevent supply chain disruptions and geopolitical uncertainties, Mexico has emerged as a key?beneficiary?in the nearshoring landscape. Recognized for its?proximate?location?to the US,?a?skilled workforce, lower manufacturing costs,?and participation in trade agreements,?Mexico?continues to be an attractive?nearshoring destination?especially for companies pursuing growth through acquisitions. As a result, this should spur M&A activity in Mexico, as privately-held companies become targets for US-based manufacturers, especially those in the automotive sector. Mexico’s industrial real estate sector is also feeling the impact of nearshoring strategies. As companies look to expand their operations and take more production space in Mexico, the regional industrial real estate market strengthens as vacancy rates decrease, rents increase, and property values rise with greater demand.

Conclusion

The?convergence of M&A trends,?increasing adoption of artificial intelligence,?expectation of lower interest rates (read?last month's article)?and the strategic considerations of nearshoring?strategies?create a dynamic environment where opportunities and challenges?can?coexist. Companies must navigate this complex landscape with a?proactive?approach, leveraging the?opportunities?presented by technological advancements, favorable financial conditions, and nearshoring initiatives?to their advantage. Success?will ultimately lie?in the ability to adapt, innovate, and strategically position businesses for sustainable?growth using all tools and strategies available.

One way to unlock the full potential of M&A deals with a strategic financial maneuver is through the sale leaseback strategy. Imagine seamlessly integrating the sale of a target’s real estate assets into your acquisition strategy, reducing your equity check, enhancing your capital stack, and setting the stage for immediate value creation. Dive deeper into this innovative approach in our upcoming?Ascension Learning: Master The Sale Leaseback?course, where we unravel the complexities and unveil the many benefits of the sale leaseback.?