Mergers and Acquisitions: A pillar in the global financial landscape

Mergers and Acquisitions (M&A) is a fundamental pillar in the global financial landscape, consisting of extraordinary transactions aimed at external growth. The main objective of these transactions is often, with reference to large companies, to acquire new markets and new products by benefiting from important economies of scale or, with reference to small and medium-sized companies, to achieve a competitive ‘safety’ dimension by optimising the use of internal resources.

It is important to consider that M&A transactions can also present risks, such as cultural conflicts between the companies involved and the absence of those synergies or cost savings that were hypothesised when the transaction was being studied.

The global M&A landscape in 2023 slowed down significantly, with a 15% contraction in Europe, Asia-Pacific and the US, especially for deals above $100m. This trend was influenced by several factors, including rising interest rates, macroeconomic uncertainty and the gap in valuations of companies in M&A deals. However, M&A activity picked up during 2024, driven by the expectation of less restrictive monetary policies and reduced inflationary pressures.

The upswing in M&A transactions has been driven by settling multiples, particularly in the life sciences and oil & gas sectors, as well as a heightened focus on environmental, social and governance (ESG) issues, energy transition and the adoption of new technologies, such as Generative Artificial Intelligence (GAI). Investors have resumed vigorously scouting for new investment opportunities, factoring in expectations of less restrictive monetary policies and lower inflationary pressures.

At the international level, the International Monetary Fund has forecast global growth of 3.0% in 2023 and 2.9% in 2024, figures that remain below the average of the two decades prior to the pandemic. In Italy, the M&A market picked up strongly in the first quarter of 2024, with a significant increase in medium-to-large deals, especially in the energy, industrial and financial services sectors. The role of private equity was significant, with an increase in deals compared to the previous year, especially in the energy and industrial sectors.

However, it should be noted that the actual value of M&A deals may be higher than reported, as not all transactions are always publicly disclosed. A driving factor last year was add-ons, i.e. acquisitions by companies already in the portfolio of private equity funds, a growth strategy now considered essential by most players.

The Italian stock market saw new listings and delisting transactions in the first quarter of 2024, with the energy and utilities, industrial markets and financial services sectors accounting for the majority of the countervalues recorded. Transactions in the ‘Made in Italy’ sector dominated the M&A scene, confirming the consolidation of the Italian industrial sector.

The main drivers fuelling M&A activity in Italy at the beginning of 2024 include the internationalisation of the production fabric, the energy transition, digital transformation, and the infrastructure investments needed to meet the new demands of consumers and businesses. Despite a wait-and-see phase in the first two quarters of 2024, the deal pipeline is solid across all sectors, with growing interest in niche sectors related to professional development.

Aeffe Capital and its partners act as advisors in the realisation of mergers, acquisitions, disposals of companies, business units or shareholdings, assisting Italian and international companies and institutional investors throughout the process necessary to reach the “closing” of the transaction.