[Edaily Marketin YunJi Kim Reporter] In the global mergers and acquisitions (M&A) market, there is a noticeable trend of capital flowing toward proven assets. As interest rates and geopolitical uncertainties make it difficult to predict future earnings, there is a growing preference for assets with proven cash flow or clear plans for value enhancement following an acquisition.

According to global financial information provider LSEG on the 7th, the total value of global M&A transactions in the first half of this year reached $2.8 trillion, a 48% increase from the same period last year; however, the number of deals fell by 9% to approximately 24,000. In particular, 47 large-scale deals worth over $10 billion accounted for nearly half of the total transaction value, suggesting that transactions are concentrating on select assets with scale and competitiveness rather than spreading across the broader market.

This trend is influenced by the fact that it has become more difficult to acquire companies by leveraging low interest rates and abundant debt—as was common in the past—and then expect their valuations to rise. Buyers are increasingly gravitating toward companies that have already secured a customer base and revenue stream or generate stable cash flow, rather than assets based on various growth assumptions.

The rise of carve-out deals as a major investment avenue follows the same logic. As companies spin off non-core business units to concentrate capital on their core operations, private equity (PE) firms are adopting a strategy of acquiring assets with established business foundations and developing them into independent companies. Another key attraction is the ability to refine cost structures or pursue additional acquisitions based on existing customers and revenue, rather than having to pioneer new markets from scratch.

Related cases are also accumulating in the market. A prime example is the deal announced last May in which global flavor and fragrance company IFF agreed to sell its food ingredients division to CVC Capital Partners for approximately $4.3 billion. This division recorded sales of about $3.1 billion last year, and IFF plans to use the proceeds from the sale to reduce debt and invest in its core businesses.

The supply of carve-out assets is also likely to continue for the time being. This is because, as the burden of investing in growth areas—including artificial intelligence (AI)—increases, global companies are focusing their capital and management capabilities on their core businesses. While such transactions were previously largely driven by the need for companies with deteriorating financial structures to sell assets, they are increasingly taking on the character of proactive business restructuring aimed at simplifying the business portfolio and securing funds for investment in growth areas.

In fact, according to a survey conducted by KPMG among global corporations and private equity (PE) professionals, 71% of PE investors reported that they are reviewing or pursuing carve-out transactions. Additionally, 55% indicated that they have specific transaction plans in place. This is the backdrop for predictions that carve-out transactions will emerge as a major trend in this year’s global M&A market, driven by the convergence of supply and demand.

An industry insider stated, “Given the lingering pressure to exit existing portfolio investments, coupled with unresolved issues regarding interest rates and geopolitical uncertainty, it is highly likely that investors will prioritize assets with proven performance and market position even in new investments.” The insider added, “In particular, as corporate restructuring continues, competition for deals—including carve-outs—that allow for the development of concrete post-acquisition value-enhancement strategies is expected to become even more intense.”