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

However, the underlying conditions are slowing deal-making. Inversion of the yield curve, where short-term debt instruments are more profitable than bonds with a longer term is not sustainable. The rising interest rates make it difficult to raise money and shift the focus of many businesses away from M&A. And global instability continues to deter potential acquirers.

Another driving force that will shape the future of M&A is a growing focus on ESG (environmental social and governance) issues. As these issues are incorporated into the strategic agenda of more CEOs and CFOs, they’re likely driving M&A that includes purchases and disposals of assets with the aim of reducing their environmental footprint.

In the final analysis it is worth noting that the M&A landscape is undergoing further change as companies seek partners that are more aligned with their main business objective. M&A will continue to expand in sectors with supply chain disruptions that are growing and where vertical integration is more important than ever. This will include the information and communication technology (ICT) manufacturing, food and automotive industries. Additionally the trend of consolidation is likely be a common feature in sectors where startup successes have led to high valuations. This includes areas such as artificial intelligence, augmented realities, telemedicine, and blockchain.

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