Trends in Mergers and Acquisitions in 2024
Introduction
Similar to previous years, in 2024, mergers and acquisitions (“M&A”) transactions continue to be shaped by global economic dynamics, geopolitical risks and technological innovations. Unfortunately, 2023 stood out as a year of global decline in M&A transactions. During this year, high interest rates, economic uncertainties and geopolitical risks significantly affected companies’ M&A decisions. In particular, the decline in the number of large deals and differences in valuations led to a slowdown in M&A transactions. However, large transactions in some sectors showed that the market has not completely stalled. While assessing the impact of 2023 on M&A transactions, this newsletter aims to discuss the projected trends for 2024 and their possible impact on the M&A market.
Background to Mergers and Acquisitions in 2023
In 2023, the value of global M&A transactions fell 16 percent to $3.1 trillion, even weaker than the 2020 pandemic year. The average deal size increased by 14 percent thanks to a series of large transactions.
The reasons for the decline in M&A transactions may be listed as (i) high interest rates, (ii) economic turmoil and (iii) geopolitical risks.
Sellers were not willing to sell as company valuations were lower than their expectations. There were huge gaps between the price expectations of buyers and the prices demanded by sellers. This was observed as the most important reason for the decline in M&A transactions.
On a sectoral basis, transactions in the pharmaceuticals, healthcare and energy sectors were on the rise again in 2023. Although there was a decrease in M&A transactions in the technology sector in 2023 compared to previous years, transactions in technology companies continued to be in demand due to companies producing artificial intelligence-based solutions. The most prominent examples of artificial intelligence increasing the demand for technology sectors are Microsoft’s $13 billion investment in OpenAI and Google and Amazon’s $2 billion and $4 billion investments in Anthropic.
Companies have turned to vertical transactions to boost current profits and transform future operations. For example, automotive companies, Stellantis’ investment in Lyten and Ford’s acquisition of Auto Motive Power aimed to future-proof their access to charging technology.
Private equity deals were particularly affected by the rise in interest rates. Private equity transactions accounted for only 18% of M&A transactions in 2023 ; total value fell 37%. Private equity’s uninvested capital reached a record high of $2.59 trillion as of 15 December 2023.
Expectations for 2024
M&A transactions in 2024 are expected to increase. The increase in transactions towards the end of 2023 is actually a harbinger of this.
With rising interest rates becoming more stable - or even declining in many countries globally - companies that have been hesitant about M&A transactions are expected to re-enter the market. In particular, banking, energy, healthcare, technology and real estate investments are expected to increase. So far the lead sectors by value and volume in Q1 of 2024 in Turkey, Middle East and Africa are telecoms, media and technology and energy, mining and utilities.
The rise of scale deals, which can be defined as M&A transactions in which companies aim to increase their market share in the sectors in which they operate, is expected to continue in 2024, while the number of scope deals, which can be defined as transactions aiming new competencies and access to new markets, is expected to be relatively limited.
Companies are expected to divest assets that do not fit their strategies.
Private equities are expected to be more involved in M&A transactions in the coming period due to factors such as the size of the reserves that private equities have not yet converted into investments and the relatively lower interest rates on a global scale compared to last year, and to direct their exit strategies and new investments.
With representation and warranty insurance becoming cheaper compared to previous years, it is estimated that the demand for representation and warranty insurance will increase in M&A transactions that will take place in 2024.
Despite a projected rise in M&A transactions in 2024, it is important to consider some key factors that could impact deal flow. Difficulties in access to financing are likely to continue to have an impact on M&A transactions. In addition to difficulties in accessing financing, legal regulations also continue to have consequences for M&A transactions. In particular, it is noted that ESG-related regulations will increase in importance in M&A transactions while tightening regulations on environmental issues may create difficulties in transactions. Competition law, data protection legislation, sanctions regimes, regulations on foreign investments and foreign subsidies will also be decisive for transactions.
Valuation differences between sellers and buyers are expected to continue in 2024. Deferred payment in the form of seller notes and earn-out mechanisms are expected to be more widely used to resolve these issues.
Conclusion
In conclusion, 2024 has the potential to be a promising year for M&A transactions. The stabilization of rising interest rates and their decline in some countries will create an opportunity for companies to re-enter the market. Increased investments in sectors such as banking, energy, healthcare, technology, and real estate are expected to stimulate M&A transactions. In addition, high reserves of private equity funds and easing difficulties in accessing financing will contribute positively to the M&A market. However, factors such as legal regulations, ESG-related rules and competition law will continue to be determinants of M&A transactions. The wider use of deferred payment methods and earn-out mechanisms to overcome valuation differences between sellers and buyers may change the dynamics in the M&A market. Considering all these factors, 2024 may be a more active year for M&A transactions and full of opportunities.
- Henry, Jake / Van Oostende Mieke: Top M&A trends in 2024: Blueprint for success in the next wave of deals (https://www.mckinsey.com/capabilities/m-and-a/our-insights/top-m-and-a-trends-in-2024-blueprint-for-success-in-the-next-wave-of-deals, Access Date: 01.06.2024.)
- "M&A in 2023 and Trends for 2024" (https://www.mofo.com/resources/insights/240104-m-a-in-2023-and-trends-for-2024, Access Date: 01.06.2024.)
- Harding David / Stafford, Dale / Grass, Kai / Kumar, Suzanne / White, Lindsey: "Looking Back at M&A in 2023: Who Wins in a Down Year?" (https://www.bain.com/insights/looking-back-m-and-a-report-2024/#:~:text=In%202023%2C%20the%20total%20M%2026A,ve%20been%20in%20a%20decade, Access Date 01.06.2024.)
- Harding David / Stafford, Dale / Grass, Kai / Kumar, Suzanne / White, Lindsey: "Looking Back at M&A in 2023: Who Wins in a Down Year?" (https://www.bain.com/insights/looking-back-m-and-a-report-2024/#:~:text=In%202023%2C%20the%20total%20M%2026A,ve%20been%20in%20a%20decade, Access Date: 01.06.2024.)
- Henry, Jake / Van Oostende Mieke: Top M&A trends in 2024: Blueprint for success in the next wave of deals (https://www.mckinsey.com/capabilities/m-and-a/our-insights/top-m-and-a-trends-in-2024-blueprint-for-success-in-the-next-wave-of-deals, Access Date: 01.06.2024.)
- Aquila, Frank: Chambers and Partners Corporate M&A 2024 (https://practiceguides.chambers.com/practice-guides/corporate-ma-2024 Accessed: 01.06.2024.)
- "Why 2024 Could Be a Hot Year for M&A" (https://www.morganstanley.com/ideas/mergers-and-acquisitions-rebound-2024#:~:text=Banking%2C%20energy%20energy%2C%20healthcare%2C%20real,in%20Europe%20and%20North%20America. Access Date: 01.06.2024.)
- "Why 2024 Could Be a Hot Year for M&A" (https://www.morganstanley.com/ideas/mergers-and-acquisitions-rebound-2024#:~:text=Banking%2C%20energy%20energy%2C%20healthcare%2C%20real,in%20Europe%20and%20North%20America. Access Date: 01.06.2024.)
- Deal Drivers: EMEA Q1 2024, Datasite (chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.datasite.com/docs/default-source/reports/datasite-deal-drivers-emea-q1-2024-report-with-mergermarket.pdf) Access Date: 01.06.2024.)
- Norton Rose Fulbright Global M&A Trends and Risks 2024 (https://engage.nortonrosefulbright.com/29/33208/uploads/nrf-global-ma-report-2024-v8-jf.pdf?intIaContactId=%2b5K%2fBoKgBZVJY0ocl5Jjfg%3d%3d&intExternalSystemId=1 Access Date: 01.06.2024.)
- Norton Rose Fulbright Global M&A Trends and Risks 2024 (https://engage.nortonrosefulbright.com/29/33208/uploads/nrf-global-ma-report-2024-v8-jf.pdf?intIaContactId=%2b5K%2fBoKgBZVJY0ocl5Jjfg%3d%3d&intExternalSystemId=1 Access Date: 01.06.2024.)
All rights of this article are reserved. This article may not be used, reproduced, copied, published, distributed, or otherwise disseminated without quotation or Erdem & Erdem Law Firm's written consent. Any content created without citing the resource or Erdem & Erdem Law Firm’s written consent is regularly tracked, and legal action will be taken in case of violation.
Other Contents
Law No. 7262 dated 27.12.2020 introduced an obligation to notify the Central Registry Agency (“CRA”) regarding the issuance and transfer of bearer shares under the Turkish Commercial Code No. 6102 (“TCC”) and stipulates that those who violate the notification requirement under Art. 486/2 of the TCC shall be...
Under Article 365 of the Turkish Commercial Code No. 6102 ("TCC"), each member of the board of directors, which is the body responsible for the administration and representation of a joint stock company, is obliged to fulfill their duties arising from the law and the articles of association within the limits...
The common goal (in the ideal world) of people who become shareholders by participating in the capital of a company or managers by participating in the management body is to manage the company in the best way and to obtain maximum economic benefit...
The most common forms of agency agreements can be categorized under three main headings. These can be listed as an Agency Agreement, Distributorship Agreement, and Franchise Agreement...
Employee shareholding, which means the ownership of some or all of the capital of a publicly traded or closed company by employees, has attracted great interest in many countries around the world, particularly in the United States of America, due to the advantages it provides to the national economy, the...
There are many different rules that newly established companies must consider and comply with when starting their commercial activities. One of these rules is the "Evasion of Law" article regulated under Article 356 of the Turkish Commercial Code No. 6102 ("TCC"). The relevant rule aims to prevent the...
The Turkish automobile and light commercial vehicle market left the 2000s behind with steadily rising sales figures and the 2010s with high and stable sales figures as well. In this period, the growth of the market was driven not only by high purchase power but also by easy access to credit and product diversity...
Turkish Commercial Code No. 6102 ("TCC") provides the right to exit from the company to the shareholders of limited liability companies and the right to squeeze out the shareholder from the company, unlike the structure of joint stock companies, with the exit and squeeze out institutions specially regulated for...
Turkish Commercial Code No. 6102 (“TCC”) preserves the rule that the board of directors shall manage and represent joint stock companies. The TCC regulates how the power of representation shall be exercised, the registration and announcement of the persons authorized to represent, the transfer of the...
Ordinary partnerships are regulated under Turkish Law between Articles 620 and 645 of the Turkish Code of Obligations No. 6098 (“TCO” or the “Code”). The Law defines an ordinary partnership contract as a contract where two or more persons undertake to combine their labour or property to achieve a common...
Merger and acquisition processes are one of the legal processes that most seriously affect the identities and legal status of companies. After the completion of legal, tax, financial and operational due diligence reports, the parties initiate the negotiation process in case they reach an agreement on proceeding with the...
A popular business model for expanding market reach and brand recognition worldwide is franchising. Despite being less common than distribution agreements in the form of mono-brand store agreements, franchising is another significant method for extending luxury brands' distribution networks. Luxury brands use...
In the decision dated 14.06.2022 and numbered 2019/149 E. 2022/894 K., the Court of Cassation General Assembly (“CCGA”) evaluated the theory of piercing the corporate veil in the context of the relationship between the guarantor and the borrowing company in a dispute arising from a loan agreement...
The European Union continues to be an important investment center for foreign investors. According to data from the European Commission's "Second Annual Report on the monitoring of foreign direct investment in the European Union", the European Union received €117 billion worth of foreign direct investment in...
Transfer of shares is arguably the first legal transaction that comes to mind among the legal transactions regarding the shares of a capital company, and the most common transaction in practice. However, the shares of a capital company may also be subject to various transactions, other than share purchase...
Law No. 6563 on the Regulation of Electronic Commerce (E-commerce Law or Law) has recently undergone a radical change in order to regulate the behavior of the players in the rapidly growing and developing e-commerce sector. The new regulations that came into force as of January 1, 2023 envisage important...
On 11 June 2021, the German Federal Parliament approved the German Supply Chain Due Diligence Act (Lieferkettensorgfaltsgesetz) (“Act”) which affects not only German entities but also their suppliers in foreign countries (including Turkish entities). The main focus of the Act, which entered into force on...
On 21 December 2007, the Federal Council approved the draft revision of the Swiss Code of Obligations, which also includes amendments to company law. On 28 November 2014, the Federal Council referred the draft revision for consultation. Following extensive discussions and a long enactment process, the...
The Turkish Commercial Code No. 6102 ("TCC") regulates maritime trade contracts under the fourth part of the fifth book of the Code. Among the types of contracts regulated in this section, the most frequently used contract in international maritime transport practice is the freight contract regulated under...
Prohibition on hidden income shifting is one of the most important issues that is broadly regulated under Capital Markets Law No. 6362 (“CML”). In conjunction with CML Article 21, which has a broader context than Article 15 of the abrogated Capital Markets Law No. 2499, another significant step has been taken...
As a result of developing commercial activities and large-scale investments, especially concluded in the fields of construction, energy and mining, companies are seeking to participate in these investments by uniting their powers and expertise to take advantage of financial opportunities together. This tendency...
The Turkish Commercial Code (“TCC” or “Law”) has enabled companies to apply different structural models and to implement new legal formations by including spin-off provisions to its Article 159 et seq. In accordance with the provisions of the law, companies may transfer a certain element, or elements, of their...
The International Federation of Consulting Engineers is a professional association established in 1913, known as the FIDIC (Fédération Internationale Des Ingénieurs-Counseils). Its members are duly elected from consultant-engineer associations of various countries, and membership to the association is...
Incoterms are a set of rules introduced by the International Chamber of Commerce (ICC) to explain the commercial terms that are widely used in international trade. The purpose of Incoterms rules is to facilitate and expedite international trade in a safe and secure manner...
The regulation applicable to all Turkish ports prepared by the Ministry of Transport, Maritime Affairs and Communications that entered into force after being published in the official gazette on October 31, 2012 (˝the Regulation˝), consolidates all the bylaws, regulations and instructions in a single Regulation...
As a rule, rights and obligations arising from an agreement have legal consequences only between the creditor and the debtor which are parties to the agreement. This principle is referred to as "privity of contract." In general, contracts for the benefit of third parties, where the fulfillment of an...
The rules of e-commerce, which grow and develop with the digitalizing world, are changing. E-commerce has become the driving force of the digital economy. However, considering the growth rate of e-commerce and the transformation it has undergone in a short time, it is obvious that some...
The dissolution of a company is a specific type of dissolution, which results in the cancellation of the legal personality which was gained by registration at incorporation. The specific proceeding which leads to the dissolution, and thus, the termination of a company upon the constitutive decision...
Companies in which shares or authority to manage is held by members of a family are considered to be “family businesses”. Family members can hold shares that control the company, as well as retain management authority. Having a family business means opportunity, security and income for...
Turkey ratified the Convention on the Contract for International Carriage of Goods by Road (“CMR”) in accordance with Act No. 3939 dated 7 December 1993, and the CMR entered into force in Turkey on 31 October 1995. In accordance with Article 1 / 1 of the CMR, the carriage of goods by road...
Ordinary partnerships are governed by Article 620 et seq. of the Turkish Code of Obligations No. 6098 (“TCO”). An ordinary partnership agreement is defined as an agreement whereby two or more persons undertake to join efforts and/or goods to reach a common goal...
The concept of disguised profit transfer in joint stock companies, in its broadest meaning, covers the transfer of company assets to related parties and may occur in different ways. This concept is regulated in detail under capital markets legislation...
Share subscription agreements, which are commonly encountered in start-up investments, set out the terms and conditions of an investor’s participation in a company as a shareholder by subscribing the new shares issued in a capital increase...
The electronic signature, which has the same legal consequences as wet signatures if it meets certain conditions, has taken its place in many legal systems and has enhanced commercial life. Although there are various types and applications in different legal systems...
INCOTERMS are a set of rules introduced by the International Chamber of Commerce (ICC) to explain the commercial terms that are widely used in international trade. The purpose of the Incoterms rules is to contribute to and facilitate the safe and swift conduct of international trade...