We’re over halfway through 2020, and so much has changed since the beginning of the year. The inauguration of a new U.S. president, a variety of new legislation, and numerous geopolitical events have all affected the globe. It’s essential for business owners to understand these trends to continue growing in a constantly changing market. This article focuses on several M&A trends expected to influence M&A through the rest of the year and beyond.

Increasing Use of AI

With the overwhelming increase in the use of generative artificial intelligence (gen AI)  in all industries, it should surprise no one that AI and machine learning are becoming more popular in the mergers and acquisitions sector as well. Gen AI can be used to speed up processes like due diligence, through summarizing documents and explaining applicable rules and regulations. However, it’s important not to allow AI to do all of the detailed work. A recent survey of 120 large companies revealed that 89% of them noticed neutral or disappointing results relating to gen AI.

Rise in ESG-Driven Deals

A growing number of countries are joining the effort to reach net-zero greenhouse gas emissions by 2050, which has an impact on businesses everywhere. To achieve such a massive shift, more than $100 trillion in corporate assets would have to transition to low-emissions models. The value and volume of ecologically green M&A deals have increased since 2013, only slowing down in 2024, potentially as a response to multiple elections worldwide. Despite this, experts anticipate a continual increase in green M&A deals.

Growth of Cross-Border Transactions

There have been many legislative changes throughout the year, such as the SBA rule changes at the beginning of June. These changes have created a sense of economic and geopolitical uncertainty for all sectors, including mergers and acquisitions. Regardless of these uncertainties, the pressures on the financial services sector to adapt to the changing environment are creating proactive dealmakers unafraid of making bolder moves than in the past. With this in mind, mergers and acquisitions will continue to play an important role, perhaps a more relevant role, in aiding the adaptation of financial services through large-scale, cross-border transactions. 

Consolidation in Multiple Sectors

Multiple industries have seen an increase in consolidations, including tech, health care, and energy. Health care specifically has seen such an intense increase in consolidations that the Federal Trade Commission authorized a lawsuit to block a hospital acquisition and issued a request for information on the effects of consolidation involving health care providers. This increase creates a proportional increase in M&A deals, as a result of companies seeking out each other’s technology, assets, and market share. While it is unclear what the FTC and other government entities will declare in reference to health care consolidation, it’s clear that consolidation will continue as an overall trend. 

Surge in Alternative Deal Structures

Alternative deal structures are on the rise. Deal structures such as joint ventures and alliances are higher than they have been in the past two decades. These alternative deals have settled at a higher percentage compared to 2004-2008, the last period, when there was a surge in both JVs and alliances. Due to the increased uncertainty of recent times, these deals are compelling as they give dealmakers the potential to reduce their dependence on interest rate fluctuations. Uncertainty seems to be our new normal, so preparing for these alternative deal types will give you an advantage for the future.

Conclusion

The mergers and acquisitions landscape will continue to change as the year goes by. AI is likely to continue to rise in popularity and be utilized where possible, with caution. A focus on sustainability will continue, and likely aid in the shift towards consolidation in numerous sectors. Cross-border deals are likely to continue and become more popular, in spite of economic and geopolitical tensions. The same tension generates an increase in alternative deal structures.

If you’d like to speak with an experienced professional in these uncertain times, reach out to Stony Hill Advisors today!