Trends in M&A

M&A activity significantly impacts market dynamics, influencing competitive landscapes, innovation, and growth strategies. If selling in the near future is the next logical step for you and your business, understanding these trends will help you and your stakeholders make informed decisions, identify opportunities, and mitigate risks, to get you closer to the best outcome when the sale commences.

So, let’s go a little deeper into current M&A market trends, explore industry-specific developments, examine influential factors, and then unpack some emerging insights into the future outlook of M&A.

Current M&A Market Trends

The M&A market has been marked by notable trends shaped by economic conditions, technological advancements, and evolving business strategies. These trends include:

Rising Deal Volume

For more than three decades there has been a steady increase in the number of M&A transactions as companies pursue growth, diversification, and market consolidation. Businesses are leveraging M&A to expand their product lines, enter new markets, and achieve economies of scale. This trend is sometimes driven by the availability of capital, low interest rates, and strong market confidence.

Elevated Valuations

High valuations reflect strong buyer confidence and growth potential. Various sectors go through cycles of consolidation, making them attractive targets for acquisition. Elevated valuations indicate a competitive market where strategic assets command premium prices.

Cross-Border M&A

Cross-border M&A allows businesses to diversify their geographic presence, tap into new customer bases, and mitigate risks associated with domestic market fluctuations. Despite geopolitical uncertainties, cross-border transactions remain a significant aspect of M&A activity.

Private Equity Activity

Private equity firms are highly active, utilizing their capital and expertise to drive acquisitions and industry consolidation. These firms play a crucial role in reshaping industries by acquiring, restructuring, and growing companies. The involvement of private equity adds dynamism to the M&A market, often leading to significant transformations within target companies.

Industry-Specific M&A Trends

B2B Services

Key Drivers in M&A

In the B2B services sector, M&A activity is being driven by these key factors:

• Service Expansion: Companies are pursuing acquisitions to broaden their service portfolios and enhance their market reach. By integrating complementary services, businesses can offer a more comprehensive range of solutions to their clients and enter new markets.
• Client Diversification: Strategic acquisitions enable companies to diversify their client bases and expand into new industries and geographic regions. This approach helps companies address varied client needs and strengthen their competitive position.

Notable Recent M&A Deals

• Aramark’s Acquisition of Uniform Services Business from AmeriPride: Aramark expanded its service offerings in uniform rental and facility services by acquiring AmeriPride’s uniform services business. This deal enhances Aramark’s ability to provide comprehensive workplace solutions to a broader range of industries.
• CBRE’s Acquisition of Turner & Townsend’s Project Management Business: CBRE expanded its project management capabilities by acquiring Turner & Townsend’s project management and advisory services. This deal enables CBRE to offer enhanced project management and consultancy services in various sectors, including real estate and construction.

Manufacturing

Trends and Motivations

M&A in manufacturing is increasingly driven by the need to diversify product offerings and enter new markets. Key trends include:

• Product Diversification: Companies are pursuing mergers and acquisitions to expand their product lines and enter niche markets. This trend is particularly evident in industries like aerospace, where firms are integrating specialized components to enhance their product offerings.
• End Market Expansion: Manufacturers are focusing on acquiring businesses that serve high-growth end markets. This includes targeting sectors such as renewable energy, where companies are investing in methods that support sustainable energy solutions, and advanced materials, where new product innovations are meeting the demands of emerging industries.

Significant Manufacturing M&A Transactions

• Kraton’s Acquisition of ICIG’s Adhesive Resins Business (2021): Kraton, a leading provider of sustainable polymer solutions, acquired ICIG’s adhesive resins business to strengthen its position in the adhesives market. This deal highlights Kraton’s strategy to expand its product offerings in the specialty chemicals sector.

Distribution Companies

Consolidation Trends

Distribution companies are experiencing significant consolidation as firms aim to access unique products and penetrate new markets. Trends include:

• Diverse Product Availability: M&A activity is driven by the need to provide customers with a wider range of unique and specialized products. Companies are merging to expand their product offerings and cater to niche markets.
• Market Expansion: Firms are consolidating to enter new geographic and demographic markets. This allows companies to reach previously untapped customer bases and grow their market presence.

Notable Recent M&A Deals in the Distribution Sector

• Sysco’s Acquisition of Brakes Group: Sysco, a leading foodservice distributor, acquired Brakes Group, a major food distributor in Europe. This deal allowed Sysco to expand its reach into the European market and broaden its product offerings, strengthening its position as a global foodservice leader.
• Unilever’s Purchase of The Honest Company: In 2021, Unilever acquired The Honest Company, known for its natural and eco-friendly personal care and household products. This acquisition helped Unilever diversify its product portfolio and tap into the growing market for sustainable products.

Factors Influencing M&A Trends

Economic Conditions

Economic stability and growth foster M&A activity, while economic downturns can dampen deal-making as companies become more risk-averse. Factors such as interest rates, inflation, and GDP growth impact the availability of capital and the willingness of companies to engage in M&A.

Regulatory Changes

Regulatory environments significantly impact M&A trends. Antitrust laws, data privacy regulations, and trade policies can either facilitate or impede M&A activity, requiring careful navigation by companies. Changes in regulatory frameworks can create both opportunities and challenges for businesses seeking to merge or acquire.

Potential Challenges and Opportunities

• Regulatory Scrutiny: Increased regulatory scrutiny may pose challenges, particularly for large-scale deals. Companies must navigate complex regulatory landscapes to ensure compliance and avoid potential roadblocks.
• Geopolitical Risks: Political instability and trade tensions can impact cross-border M&A. Businesses must be aware of geopolitical risks and develop strategies to mitigate their impact.

Staying updated on M&A trends is crucial for businesses and investors to effectively navigate the dynamic market landscape. As the M&A market evolves, staying informed and agile will be key to capitalizing on opportunities and achieving long-term success. Businesses that adapt to these trends will be better positioned to thrive in an increasingly competitive and interconnected global market.

Destined can help you navigate these shifting trends, and then leverage them to ensure your sale is most beneficial. Let’s connect.