M&A and Its Strategic Role in the Business Landscape

2024/04/29

Posted by 3Capital Partners

Companies adopt merger and acquisition (M&A) strategies not only to boost growth and expand their market share but also to leverage new technologies and innovative solutions. These initiatives also aim to improve operational efficiency, cut expenses, and attract specialized talent, which are crucial elements for optimizing performance and diversifying the business portfolio.

The Brazilian Market

The Covid-19 pandemic accelerated the need for companies to quickly adapt to digitalization and operational efficiency. As a result, partnerships and alliances with startups, technology companies, and innovation increased, driving significant growth in merger and acquisition (M&A) operations during this period. In 2021, Brazil witnessed record numbers in M&A transaction value and volume, driven by a scenario of historically low-interest rates and high global liquidity, resulting from economic measures adopted to ensure the continuity of business activities during the pandemic.

However, from the end of 2021, volatility in the macroeconomic environment, along with new challenges in the global business environment such as conflicts and trade barriers between major economies, interrupted the high liquidity cycle. This, combined with the trend of rising interest rates, influenced corporate decisions throughout 2022, resulting in a reduction in the number of transactions compared to the previous year. Investors’ prudence persisted until 2023, keeping M&A transactions below 2021 levels, but gradually approaching pre-pandemic patterns.

It is notable that, among the companies participating in the Deloitte study, 33% conducted operations in the last five years. Of these, 64% have plans to carry out new mergers and acquisitions by 2028, highlighting the success of the strategies adopted. Leaders of these organizations emphasize that the pursuit of synergies, market expansion, and operational efficiency are the main drivers that encourage them to invest in such operations.

The Importance of Operations for This Scenario

These studies offer a clear indication that success in mergers and acquisitions requires meticulous preparation and strategic execution. The main obstacles pointed out include the legal and operational complexities associated with mergers and acquisitions. Additionally, there is a highlighted concern about the integration of the cultures of the involved companies and an inadequate measurement of synergies.

With market advancements, there are increasingly modern tools to assist companies that still feel insecure about the complexity of a transaction to overcome the gap that separates them from those that already benefit from this important transformational tool. One such tool is the use of technology, with 61% of organizations already using techniques to extract insights from information, known as “Analytics,” or even Artificial Intelligence (AI), to boost their operations.

Be Accompanied by Those Who Understand the Market

If your company is planning an M&A, it deserves the proper preparation to go to market. Whether for sale or capitalization, contact us. Our team of experts is available to contribute to the maximization of value and the preparation of your company for a successful transaction.