In April, L’Oreal signed a deal to acquire beauty brand more tips here Aesop. Hewlett Packard Enterprise acquired Israeli cloud security company Axis for $500 million. Energy Transfer, a U.S. midstream firm, merged with Lotus Midstream Operations to the tune of $1.45 billion. The consensus is that these and other deals happening in the second half of 2023 will jolt M&A activity.
However, the fundamental conditions slow the process of negotiating. A yield curve that is inverted where shorter-term debt instruments offer higher yields than bonds with longer maturities is not sustainable. The rising rates of interest make it difficult to borrow money and also shift the focus of many businesses away from M&A. Global volatility continues to discourage potential buyers.
A growing attention to ESG issues (environmental Social and Governance) is a different force that will shape the future of M&A. As these issues become part of the strategic agendas of more CEOs, they will likely be driving M&A which includes the purchase and selling of assets in order to reduce their environmental footprint.
The M&A landscape is changing as companies look for partners that are closer to the core objective of their business. M&A will continue to expand in industries with disruptions to supply chains that are growing and where vertical integration is required more than ever. This will include the information and communication technology (ICT) and food, manufacturing and automotive industries. Consolidation will also be seen in sectors that have been able to enjoy high valuations because of startup success. This will include areas such as artificial intelligence technology, augmented reality and blockchain and telemedicine.