Key merger and acquisition trends for 2024

In a world where geopolitical instability, inflation and interest rates and therefore an uncertain economic outlook are shaping the landscape, 2024 promises to be an interesting year in the world of mergers and acquisitions in the Netherlands. At Sophista, despite the challenges, we look forward to this year with optimism and identify the following three key trends:

1. Tighter deal terms due to geopolitical and economic uncertainties

Whereas 2023 was marked by necessary global conflicts and macroeconomic shifts, such as rising inflation and interest rates, these uncertainties will persist in 2024. This means stringent deal terms combined with a more extensive due diligence process, sales prices under pressure that may lead to more intense price negotiations, and longer lead times for financings. Earn-outs are expected to be proposed more frequently to bridge the gap between buyers and sellers. An earn-out is a variable portion of the purchase price that provides a bridge to realize a higher sales price if future financial performance (often) proves to be achieved (payment upon achievement of result targets).

2. Further consolidation in various sectors

Many industries have been undergoing consolidation for a number of years. Especially in maturing industries, this is a common phenomenon. We expect this trend to continue in 2024. We see this wave of consolidation taking place within the automotive, transportation, packaging, IT and construction and installation industries, among others. Through strategic acquisitions, companies are not only trying to increase their market share but can also achieve economies of scale and improve their competitive position. Investment companies and private equity parties will also continue with their buy-and-build strategies, triggering further consolidation.

3. Increasing focus on ESG

ESG is becoming increasingly important to companies, investors and stakeholders. ESG stands for Environment, Social and Governance. Companies that score well on ESG can increase value, reduce risk and improve reputation. Within takeovers, themes such as good corporate governance, sustainable entrepreneurship, diversity and inclusion and working conditions are already becoming more important. We see this reflected not only in ESG-related questions in due diligence studies but also in valuations, financing processes and during strategic sessions with acquirers, where sustainability is increasingly prominent on the agenda in the run-up to CSRD. Companies at the forefront of ESG have a clear competitive advantage. And buyers’ willingness to pay extra for companies with strong ESG presentation is also a nice bonus!

Are you interested in how these trends affect your business? If so, please contact us. Whether it concerns sale, purchase, business valuation or (growth) financing of your company, Sophista advises and assists entrepreneurs with all issues in the field of corporate finance, with the aim: maximum relief!