How Supply Chain Finance Supports Merger & Acquisition Activity and Initiatives

Global mergers and acquisitions (M&A) activity in 2024 has shown signs of recovery after experiencing significant declines in previous years. In Q1 2024, global M&A deal activity increased by 5% to 10% year-over-year, indicating a rebound from the downturns of 2022 and 2023. While the total value of global M&A deals in 2023 fell to $3.1 trillion, down 16% from the previous year, this number is expected to stabilize and improve through 2024.

The Americans remain the most active region, accounting for the largest volume and value of deals. The latest EY-Parthenon Deal Barometer forecasts that 2024 U.S. corporate M&A deal volume will increase 20% and U.S. private equity M&A deal volume will be up 16%.

Analysts predict a more measured upturn in M&A activity in 2024 compared to the rapid surges seen in 2020 and 2021. Many CEOs are once again looking to make acquisitions, while others are looking to divest assets. Industry focal points for prior-year activity and renewed interest in 2024 include the energy and materials sector, pharmaceuticals, industrial manufacturing, and automotive.

However, for many businesses, closing these deals has become a more complicated undertaking – and one in which PrimeRevenue continues to provide relief.

Why Supporting Merger & Acquisition Initiatives is Important to Us

PrimeRevenue is in the business of helping companies unlock their financial potential so they can better compete, perform, and grow. We recognize the important role that M&A plays, and the challenges many companies currently face as they pursue critical transactions.

Today’s dealmakers must balance the need for business investment with adapting to higher financing costs and a more cautious investment climate. After a couple of years of subdued activity, there is a significant backlog of demand and supply for deals. Companies that delayed transactions due to economic uncertainty are now moving forward. M&A is integral to helping organizations adapt and transform their business models in response to technological disruption, demographic shifts, climate change, and a laundry list of other stimuli.

With that forward movement, however, comes several challenges. Acquiring companies inherit different ERPs, payment processes and systems, supplier payment terms, and more. Data accuracy and integration across multiple systems can result in unpredictable cash flow and inefficient manual processes. There is a strategic need to implement automated solutions to improve forecasting, reduce volatility, and enhance operational efficiency.

How PrimeRevenue Supports M&A

PrimeRevenue’s working capital solutions support our clients’ M&A initiatives from start to finish. This includes:

• Unlocking working capital to fund M&A transactions. Supply chain finance unlocks significant working capital trapped in the supply chain. These funds can be used to invest in M&A deals, thereby reducing reliance on commercial lending (and the high interest rates that currently accompany most loans). Within the first two years of launching its supply chain finance program, Boston Scientific unlocked nearly $150 million in working capital, which helped fund a $300 million acquisition ($175 million of which was paid upfront).
• Improving key financial metrics pre- and post-transaction. Our clients have used our supply chain finance and other working capital solutions to improve financial KPIs that smooth the pre- and post-M&A transaction path. One example is a global caffeinated beverage company, which turned to PrimeRevenue to generate $750 million in cash flow gain. This was used to pay down 15 percent of its post-acquisition debt and, in turn, the company’s credit rating was upgraded three times in less than 12 months.
• Provides relief as companies align supplier payment terms. After a merger or acquisition, there is often a realignment of financial strategies between the participating companies. In many cases, this includes recalibration of supplier payment terms. Early payment programs like supply chain finance and dynamic discounting gives suppliers a way to mitigate the impact of changing payment terms.
• Consolidates supplier payments, providing transparency and predictability. Early payment programs aren’t the only benefit to suppliers in a post-transaction environment. Having access to payment visibility is also critical. PrimeRevenue’s Supplier Payment Portal consolidates supplier payments into a single portal, while giving suppliers the assurance of accurate and on-time payments. This supports sharper forecasting abilities and agile financial decision-making.Fast and easy onboarding of suppliers. Post-acquisition, companies can easily and quickly onboard suppliers onto the PrimeRevenue Supplier Payment Portal, which supports both on-time and early payment programs. This gives suppliers the ability to improve cash flow to meet any new post-transaction business requirements (early payments), as well as improve visibility into buyer payments.
• Gives suppliers from new geographies access to working capital solutions. PrimeRevenue’s supply chain finance solutions help organizations in 90+ countries optimize their working capital to efficiently fund strategic initiatives, gain a competitive advantage and strengthen relationships throughout the supply chain. We do this through a multi-funder approach that ensures supply chain finance programs are funded regardless of the supplier’s geography.

The resurgence of global M&A activity in 2024 underscores the resilience and adaptability of the market amid a complex economic landscape. As companies navigate higher financing costs and a more cautious investment climate, strategic acquisitions and divestitures are becoming critical tools for transformation and growth.

For businesses, this recovery phase offers both opportunities and challenges. Effective M&A strategies now require a balance between aggressive growth ambitions and prudent pre- and post-deal financial management. PrimeRevenue is committed to helping companies optimize their financial position before, during, and after the transaction. For us, it’s more than simply unlocking capital – it’s about unlocking the full potential for our clients to grow, compete, innovate, and thrive.