Navigating Market Downturn via M&A: Optimism vs Realism

Finding Inspiration from the Games

We have all been swept up in Olympic fever over the Summer. The Olympic spirit demonstrated by the athletes will have a long-lasting effect and continue to keep inspiring us. As I watched the athletes navigate the ups and downs of the competition, they showed relentless perseverance, extraordinary resilience, and courageous vison.

Like the rollercoaster journey of sports, the markets also inevitably experience cycles. Currently, we are in a period of volatility and uncertainty. Given the overall macro environment and geopolitical status, some organizations face the challenging task of traversing through the storm. However, it is possible to leverage the downturn to proactively position the business for future resilience and competitiveness. In this situation, two contrasting approaches often emerge: Optimism and Realism. Strategic M&A decisions driven by these two contrasting mindsets can also bring a transformative impact on the company and market and are in fact an essential tool during a market downturn.

Optimism: Embracing the Power of Positive Thinking

An optimistic approach requires a natural inclination to focus on new opportunities, even during a market downturn. By fostering a positive mindset, a strong vision, and demonstrating an unwavering belief in the organization's ability to overcome challenges, market downturns are often viewed as catalysts for transformation and reinvention.

Optimistic leaders may pursue bold M&A transactions for long-term, game changing, future positioning. Leaders with an optimistic mindset may also leverage a market downturn to facilitate strategic expansion and unlock new opportunities, for example, using acquisition and partnership transactions to access new vertical markets, expand into new geographic regions, acquire new technologies to drive innovation, or increase visibility and market share by enhancing brand awareness. 

Realism: A Pragmatic Assessment of Strategic Decisions

The realistic approach adopts a more pragmatic outlook, acknowledging and assessing the challenges posed by market downturns. Though a measured approach aiming to ensure stability and sustainability in the face of adversity, the focus during market downturns is often gathering accurate data, evaluating risks, and making informed decisions based on the available information.

Realistic leaders may focus on M&A transactions that can enable operational efficiency through cost synergies, mitigate risk factors during market downturn through diversification and hedging structure, or acquire distressed assets with a restructuring turnaround strategy that unlocks value. The transaction structure is often cautiously designed with carefully evaluated potential risks associated with change initiatives.

Finding Balance: Integrating Optimism and Realism

While optimism and realism present contrasting approaches, the most successful M&A transactions during a market downturn often represent a balance between the two methods. Combining the strengths of both mindsets can capture opportunities for growth and innovation while carefully managing risks. This balanced approach also fosters a culture of continuous improvement, allowing for experimentation and calculated risk-taking without compromising the organization's stability.

Strategic M&A transactions driven by a balance of both mindsets will not only be leveraged during the downturn to proactively transform the business for future resilience and competitiveness, but also are cautiously structured to ensure the organization remains financially stable and operationally agile to cope with potential changes in both the shorter and longer term.  

Although we are still currently navigating the downturn with reduced activities of the overall M&A market, Asia Pacific continues to be one of the most dynamic and fast-growing regional economies in the world. Our teams at Natixis CIB have been hiring, with increasing activities and revenue in the APAC region. Our global M&A network is also growing with investment in two additional boutiques in Europe.

With the recently launched five-year APAC strategic plan 2025-2030 (“Scale Up”), our APAC M&A team plans to remain agile as we grow and scale up in the region. This requires a laser-focus on growth, selectivity in our clients, projects, and continued profitability in our development.

Like the hardworking athletes at the Paris Olympics and Paralympics, in the current M&A landscape it is essential to be positive, aggressive, and even explosive with a clear strategic vision, whilst also maintaining a controlled, patient and accurate attitude. At Natixis CIB, our M&A team is committed to navigating the current market downturn with our clients and completing the race together stronger.