The recent announcement of Goldman Sachs’ proposed acquisition of a significant stake in Melita plc marks a pivotal moment for Malta’s corporate landscape.
“Having one of the world’s largest financial institutions investing in a Maltese company is already significant for our market and the country’s reputation, however, this deal is also reflective of a broader global trend which is seeing a reawakening of the mergers and acquisitions market,” says Simon Schembri, partner within Ganado Advocates’ corporate team.
Dr Schembri explains that the current reawakening of the M&A market is happening after a slumber experienced over the past few years.
“Despite the economic uncertainties and the ongoing geo-political turmoil, the M&A landscape has shown remarkable signs of recovery and companies are showing more willingness to consolidate their positions by accessing new markets and enhancing capabilities in response to evolving market demands.
“As we approach 2025, the M&A landscape is likely to continue evolving, and a notable revival is expected, especially following the election outcome in the UK earlier this year and more recently, with President Trump’s re-election last month,” adds Dr Schembri.
Dr Schembri had predicted this resurgence in the M&A market in an article for The Corporate Times in August 2023. “In 2021 and early 2022 we had seen an exceptional increase in mergers and acquisitions with Maltese interest, with some very significant and interesting transactions in the local corporate market.
Subsequently, Malta experienced a decline in M&A activity, driven by high interest rates, a stricter regulatory environment, and heightened foreign direct investment oversight in other jurisdictions, which contributed to a slowdown in the local M&A market
He explains that higher interest rates often deter companies from pursuing acquisitions, as they raise the cost of debt and complicate valuations.
“These factors not only slow the pace of deal-making but also increase the costs associated with completing such transactions, leading to fewer attractive opportunities for both buyers and sellers,” Dr Schembri adds.
Despite recent challenges and a persistently stringent regulatory environment, international observers anticipate a shift, with expectations of increased activity driven by a potential easing of regulatory restriction.
Simon Schembri, partner within Ganado Advocates’ corporate team.International outlook
Some of this year’s headlines have announced interesting mergers including Mars’ acquisition of Kellanova for $36 billion, Capital One bought iconic financial services brand Discover for $35 billion, Conoco Phillips consolidated the energy business by acquiring Marathon Oil for $23 billion and HP acquired Juniper Networks for $14 billion.
Amongst leading international CEOs, private-equity players and the investment banking industry, there seems to be consensus about the M&A outlook for 2025: it’s optimistic and looking promising, driven by factors such as a soft economic landing, rate cuts by the Fed, strong corporate balance sheets, and growing private equity (PE) activity.
Companies sidelined due to high interest rates in 2023 are now re-entering the market. EY predicts a 20% rise in overall corporate deal volume in 2024, following a 17% drop in 2023, with private equity deals also set to rebound by 16%.
Observers comment that the only way to return money to investors is by selling companies. This influx of capital, combined with favourable economic factors like lower interest rates and stable inflation, is expected to drive M&A activity.
Technology: A key role
Technology is increasingly playing a key role in the M&A landscape, as businesses increasingly turn to inorganic growth to keep up with rapid digital transformation.
AI, cloud computing, and cybersecurity are all critical areas where companies are seeking acquisitions to stay competitive. Generative AI, in particular, is expected to revolutionize deal-making, with 64% of global executives citing it as a game-changer for the industry.
Challenges remain. Regulatory scrutiny and rising valuations, driven by high premiums for targets, are pushing up expectations, which could slow deal flow. But despite these complications, sectors like life sciences, energy, and infrastructure are expected to see strong M&A activity, while others, such as consumer products and climate tech, may lag.
Malta’s growing appeal
The Goldman Sachs-Melita transaction underscores Malta’s potential as a hub for significant international deals. This landmark transaction, reflects the increasing sophistication of Malta’s corporate market.
Dr Schembri concludes, “This deal showcases Malta’s growing appeal for global investors and highlights the importance of experienced legal and financial advisors in successfully navigating high-stakes transactions.”
This article was first published in The Corporate Times.