In April, L’Oreal signed a deal to acquire the beauty brand Aesop. Hewlett Packard Enterprise acquired Israeli cloud security firm Axis for $500 million. Energy Transfer, a U.S. midstream firm, has merged with Lotus Midstream Operations to the tune of $1.45 billion. Analysts predict that these and other deals happening in the second half of 2023 will boost M&A activity.

But the underlying circumstances hinder deal-making. A yield curve that is inverted where shorter-term debt instruments offer better yields than longer-term bonds – remains unsustainable. The increasing interest rates make it harder to borrow money and also shift the focus of a lot of businesses away from M&A. Global volatility is putting off potential buyers.

Another force shaping upcoming M&A is the growing focus on ESG (environmental social, societal and governance) issues. As these issues are incorporated into the strategic agenda of more CEOs, they’re likely to drive M&A which includes acquisitions and divestitures of assets, with the goal of lowering their ecological footprint.

In the final analysis it is worth noting that the M&A landscape is currently undergoing a change as companies seek partners that are closer to their primary business goals. M&A will continue to expand in areas that have disruptions to supply chains that are increasing and where vertical integration is more important than ever. This will include information and communication technology (ICT), medtech food, fintech, manufacturing, and automotive industries. In addition the trend of consolidation is likely continue in areas where startups’ successes have led to high valuations. This includes sectors such as artificial intelligence, augmented realities, telemedicine, and blockchain.

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