Mergers and acquisitions (M&A) are set to remain a central growth strategy for companies globally, as CEOs shift in deal-making approaches. Despite a volatile macroeconomic landscape, confident business leaders are leveraging M&A to innovate, diversify, and expand their portfolios.
CEO Confidence Drives M&A Surge
A prevailing theme in 2024 is the resurgence of CEO confidence, as highlighted by EY’s latest CEO Outlook Pulse survey, which found that 69% of executives were optimistic about global growth prospects. Andrea Guerzoni, EY Global Vice Chair – Strategy and Transactions, states “Today’s business leaders are acutely aware of the prospects and risks associated with the disruptive forces shaping the commercial landscape. A combination of pragmatic optimism and a fear of being left behind is expected to drive investment and activity over the coming months. CEOs will start to shift from being reactive to proactive in a bid to get ahead and capitalize on the disruptive forces at play.” EY reported that CEOs who are more confident in the future are four times more likely to pursue acquisitions compared to their less confident peers. This optimism is not misplaced, as proactive deal-making has become an essential tool for navigating industry disruption.
Strategic Shifts in M&A
M&A activity is increasingly seen as a vehicle for maintaining a competitive edge, particularly as traditional portfolio management methods are no longer sufficient in a rapidly changing environment. C-suite leaders are recognizing the need to revise their approaches, with nearly a quarter of respondents in the EY survey indicating that their portfolio reviews are not aggressive enough. Group 1 Automotive, for instance, has strategically capitalized on acquisition opportunities under CEO Daryl Kenningham’s leadership, adding $4.79 billion in annual revenue through acquisitions, including a landmark deal to acquire 54 dealerships from Inchcape. “We’re probably more aggressive on the M&A front today than we’ve been historically — that’s both acquiring and disposing,” Kenningham said. “We’ve disposed of more dealerships in the last couple of years than we probably had in our history, but this is also the most active two years we’ve ever had in acquisitions.” Furthermore, Group 1 has set several earnings records since January 2023. Another notable achievement has been the dramatic increase in their stock price, which has almost doubled since January 3rd, 2023, closing at $352.03 on August 15th, 2024.
Similarly, the Italian sensor manufacturer Gefran is pursuing M&A in Germany and North America, demonstrating how companies are looking to international markets to drive growth. Perini said in an interview with Reuters, “We are looking at the German market, but if there should be opportunities in North America, we would evaluate them carefully.” Gefran is an employer in ten countries and generates 70% of its turnover overseas. With several targets for M&A activity, the manufacturer sees 2025 as a good year for deal-making. By targeting acquisitions that align with their core strategy and geographic diversity, companies like Gefran are expanding their global footprints while ensuring constructive collaboration with their existing operations.
M&A Trends by Sector
Certain sectors are emerging as particularly attractive for M&A. The banking, asset management, media, and insurance industries are projected to see increase activity as companies focus on acquiring capabilities that align with technological innovation and consumer demand. For instance, in the technology sector, AI is a major focus. An example of this can be seen with Advanced Micro Devices (AMD), a leader in AI hardware, who is expanding through strategic acquisitions to enhance its AI chip infrastructure. AMD CEO Lisa Su told Yahoo Finance at the Goldman Sachs Communacopia & Technology Conference that she believes the market for AI chip manufacturing “will grow to $400 billion by 2027, which is huge. And it is an AI supercycle…We’re making big bets now for the next five years. And the key is there’s no one-size fits-all in this technology race. It’s all about end-to-end AI.” For reference, she adds that AMD’s latest hardware, the MI300X GPU accelerator, is “the fastest growing product that we’ve ever seen at AMD” since its launch in 2023.
The automotive sector is also witnessing transformative M&A activity, as previously noted. Group 1 Automotive’s aggressive acquisition strategy has proven highly rewarding. When asked how they evaluate M&A deals, the organization highlighted, “Brand is really important to us. We want to grow with great brands. We like to grow in clusters, because that can give us strength in a market — it helps us with talent development, and it helps us with our used car business. There’s synergies that you can get by operating in clusters.” By focusing on high-performing markets and complementary brands, Group 1 has positioned itself as a leader, not by aiming to be the biggest, but by adding value and aligning acquisitions with long-term growth goals.
The Road Ahead
As 2024 progresses towards its end, M&A activity is expected to remain strong, fueled by a combination of strategic partnerships, joint ventures, and divestments. Nearly half of CEOs are actively pursuing strategic partnerships, and more than a third are prioritizing acquisitions as they look to remain competitive in a complex global economy. According to the experts, the key to navigating this landscape lies in balancing optimism with pragmatism. By aligning M&A strategies with core business objectives and remaining flexible in the face of disruptive forces, companies can overcome the uncertainties of today’s market and position themselves for future growth.
Resources: Ernst & Young Global Limited,CEO confidence in M&A market to drive shift from reactive to proactive deal strategy, despite macro uncertainties, Thomson Reuters, Sensor maker Gefran eyes M&A opportunities in Germany and North America, CEO says, Management Today, Research: CEO confidence to drive M&A activity despite macroeconomic uncertainties, Yahoo Finance, AMD CEO talks product pipeline in the ‘AI super cycle’, Houston Business Journal, Group 1 Automotive CEO shares how aggressive acquisitions strategy grew annual revenue by $4.79 billion,
