Defensive M&A: Building resilience
One of the lessons from the pandemic is that all companies, large or small, will need to firmly establish resilience at the heart of their business model and organisational culture. We anticipate these defensive plays will materialise in a few different ways.
Accelerate synergy realisation and deliver value: In 2022 and 2023, shareholders approved more than US$5.8 trillion worth of deals and now the dealmakers involved can expect significant investor pressure to accelerate synergy realisation and deliver value.
Optimise the portfolio: Many companies are facing pressure from activist hedge funds for portfolio restructuring, from regulators pressing for asset carve-outs as a condition for merger approval—and from their own boards, which are keen to ensure companies remain on track with sustainability and net-zero commitments.
Explore opportunistic deals to safeguard supply chains and competitive positioning: Global supply chain disruptions are affecting every sector, either directly or indirectly. In addition, changing stakeholder expectations toward environmental, social and governance (ESG) are putting pressure on businesses to fundamentally redesign their supply chain systems to improve transparency and reduce their carbon footprint. M&An activities can play a key role in shaping the response.
Offensive M&A: Charging the growth engine
Bold moves involving transformative acquisitions, ecosystem alliances and disruptive investments will be required to charge the growth engine and lay the groundwork to capture market leadership. Companies clearly need to play offence to gain momentum and we anticipate those efforts to materialise in several different ways.
Capture the digital future: The pandemic conditions ruthlessly exposed companies that lagged in digital investment, omnichannel capabilities and agile operating models. At the same time, they enabled new market opportunities for companies that were digitally prepared.
Identify portfolio gaps and expand the value chain: Corporations need to regularly reevaluate their sources of competitive advantage, identify portfolio gaps and consider opportunities for expansion. Establishing a pipeline of deals can expand a company’s value chain and make it easier to capitalise on adjacent market spaces.
ESG—delivering returns with purpose: Businesses are increasingly expected to demonstrate they can deliver returns with purpose and create value not only for their shareholders, but also for their stakeholders including employees, customers, suppliers and the societies where they operate.
Collaboration as a competitive advantage: One of the enduring legacies of the pandemic is how corporates embraced collaboration, forming the bedrock of global recovery. Current conditions will continue to bring significant challenges such as supply chain disruptions, skills shortages, climate change complexities, cross-sector convergence and many others that cannot be solved unilaterally.
Capitalise on cross-sector convergence: The rapid adoption of exponential technologies, digitisation of businesses and shifts in consumer attitudes are blurring traditional sector boundaries, leading to convergence of business models across disparate sectors. It is resulting in the further evolution of ecosystems and creating opportunities for innovators and nontraditional players to disrupt established companies by redefining the basis of competition.
M&An and the path to thrive
M&A strategies are now firmly cemented as a fundamental part of the corporate arsenal, both in defence to preserve value and in offence to drive transformative growth. This framework can help companies articulate a new combination of M&A strategies to fortify their gains, accelerate business model transformation and make horizon investments to capture lasting market leadership.