While the deal market started 2023 very softly, there has been a pickup of deals through the second quarter. CEOs are accepting the new realities of deal fundamentals, including bridging a wider valuation gap, more expensive funding and a greater likelihood of regulatory scrutiny. However, all of these factors still have the potential to stop deals from getting over the line.
Despite an increasingly complex M&A environment making transactions more difficult, the fundamental deal drivers that accelerated the M&A market through the second half of 2020 to the end of the first half of 2022 remain intact. The need to respond to technology-driven disruption is not going away anytime soon.
With AI and new technologies emerging and maturing ever more quickly, companies that can leverage them as instruments of creativity will perform better. Companies will need to deploy technology faster to cater to the evolving needs of customers, employees and the business ecosystem. This is likely to accelerate investment in digital assets – such as AI capabilities – leading to more transactions, with companies looking to improve their value proposition and/or reinforce their market position.
CEOs are also leveraging these technologies to strengthen their M&A processes themselves. When asked if they are making use of AI as part of their approach to transactions, only a tiny cohort (5%) is not currently using these capabilities or has no plans to – and they risk being outmaneuvered by the competition.