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L’Oreal announced a deal in April to acquire the beauty brand Aesop. Hewlett Packard Enterprise made a $500 million acquisition of Israeli cloud security firm Axis. Energy Transfer, a U.S. midstream company, merged with Lotus Midstream Operations to the tune of $1.45 billion. Commentators predict these and other deals will boost M&A activity in the second quarter of 2023.

But the underlying conditions still slow down the process of making deals. A yield curve that is inverted where shorter-term debt instruments have higher yields than long-term bonds – remains unsustainable. Inflation is rising, making it difficult to get loans, and they’re also shifting the focus of many companies to internal initiatives, rather than M&A. Global volatility continues to discourage potential buyers.

A growing emphasis on ESG issues (environmental, Social and Governance) is another force that will influence the future of M&A. As these issues are integrated into the strategic agenda of more CEOs and CFOs, they’re likely driving M&A that includes purchases and disposals of assets with the purpose of reducing their ecological footprint.

Finally it is worth noting that the M&A scene is experiencing further change as companies seek partners that match their primary business goals. In particular, M&A is expected to increase in the areas where disruptions to supply chains are increasing and the need for vertical integration is becoming more acute. This includes information and communication technology (ICT) as well as medtech and fintech, food manufacturing, and the automotive industry. Consolidation is also likely continue in sectors that have been able to enjoy high valuations because of the growth of startups. This includes sectors such as artificial intelligence, augmented reality, blockchain and telemedicine.