Mergers and acquisitions have become increasingly commonplace after the COVID-19 pandemic hit in 2020, and they show no signs of letting up. Tax benefits, financial benefits, access to new resources and customer bases, and the acquisition of valuable employees are some of the leading reasons why companies merge with another firm or acquire new firms. Paul Inouye, who has worked in finance and technology banking for over thirty years and has been employed by leading firms such as Lehman Brothers and Morgan Stanley, explains current trends in international mergers and acquisitions.
Paul Inouye explains that a survey conducted in 2021 shows that the overwhelming majority of U.S.-based companies looking to merge with or acquire firms outside the United States are targeting businesses in other North American countries. Europe was also a popular destination last year, with about 54% of businesses looking to merge or acquire new companies considering the European market; however, this percentage could drop drastically in 2022 as the conflict in Ukraine has pushed Europe to the brink of recession and even an immediate cessation of hostilities will likely be unable to save the continent from a recession either at the end of this year or 2023.
Interest in merging with or acquiring firms in Asia has fallen, Paul Inouye notes. China has increased scrutiny of international business deals, likely putting a damper on potential mergers and acquisitions in the country. There is also a decrease in internet deals with African countries; however, interest is only 1% lower than last year, which means that the international deals market in Africa has remained virtually unchanged.
Furthermore, Paul Inouye points out two main trends affecting all or most international mergers. One is the increased use of digital platforms for conducting a merger or acquisition and reorganizing both companies as the deal nears completion. The trend accelerated during the COVID-19 lockdowns and showed no sign of slowing as the business community discovered the multiple benefits of using digital tools to conduct complex business deals virtually. Another trend, Inouye notes, is the increased prevalence of companies taking on debt to fund new business mergers and acquisitions. The FED’s rate hikes, which are designed to tame inflation, are also leading business owners to seek out fast loans to acquire new companies before rates rise even further.
Paul Inouye predicts that the pace of international mergers and acquisitions will continue to increase in the coming year as a growing number of companies seek out international firms that can help them meet their business goals. At the same time, he points out that international mergers and acquisitions don’t just benefit business owners but also consumers. As companies join forces with other firms, they can avail themselves of new resources and additional manpower that should enable them to provide more and better products while keeping costs low for buyers. Furthermore, mergers and acquisitions enable little-known companies that don’t have large marketing budgets to partner with larger firms in bringing innovative new goods and/or services to the market.
