Will the M&A pause turn to acceleration as volatility becomes the norm?
How can companies and their advisors continue to future-proof their businesses with M&A amid the climate of uncertainty?
By AnsaradaTue Aug 30 2022Mergers and acquisitions, Due diligence and dealmaking, Advisors, Industry news and trends, Virtual Data Rooms
Ansarada’s Deal Indicators show that new M&A deals commencing decreased by 8% QoQ globally in the last quarter of the financial year. However, looking at the quarter compared to the previous corresponding period (PCP), global M&A activity was up 31% overall. Looking at FY22 overall, new M&A deals commencing increased by 8% YoY.
While 2021 was undoubtedly a record year for M&A activity, the stabilizing of the numbers indicates we are already seeing the signs of uncertainty impacting the market. We’ve gone from a period of unprecedented growth to one of cautious apprehension.
Amid inflationary pressures, rising interest rates, geopolitical unrest, stock market dives, and fears of an impending recession, deals are being put on pause until the clouds show signs of lifting. According to the International Financing Review, around 60 deals with individual values of more than US$500m have been withdrawn in the first half of 2022.
Africa and Asia were the two regions where this slowdown was most pronounced, with a 62% and 40% QoQ decrease, respectively.
Despite the slowdown in activity, it’s not all doom and gloom. Markets are resilient. They will continue moving forward as companies and investors adjust to the volatility and seek new opportunities. In their half-yearly M&A report, experts at PwC have predicted a rebound of activity into the second half of the year, driven by relatively cheap debt and the abundant dry powder that private equity backed buyers are sitting on. As soon as firms have more visibility over which parts of the market will benefit from the new normal, they will be ready - and eager - to spend.
The pandemic has spurred broader progressive change, giving people and businesses alike a renewed focus on positive social impact, and driving governments to shift their priorities. Divestment will help companies strengthen portfolios and bring attention back to core business.
‘We're seeing an acceleration of strategic decisions to enhance portfolio optimisation, as dealmakers divest to free up capital to focus on acquiring capabilities and transforming core business areas through M&A,’ says Malcolm Lloyd, Global Deals Leader, Partner, PwC Spain.
As we approach a near-constant state of chaos and volatility, M&A strategies will continue to help businesses respond to turbulence. M&A will continue to play a critical role for buyers and sellers alike as they seek to future-proof their businesses.
While 2021 was undoubtedly a record year for M&A activity, the stabilizing of the numbers indicates we are already seeing the signs of uncertainty impacting the market. We’ve gone from a period of unprecedented growth to one of cautious apprehension.
Amid inflationary pressures, rising interest rates, geopolitical unrest, stock market dives, and fears of an impending recession, deals are being put on pause until the clouds show signs of lifting. According to the International Financing Review, around 60 deals with individual values of more than US$500m have been withdrawn in the first half of 2022.
Africa and Asia were the two regions where this slowdown was most pronounced, with a 62% and 40% QoQ decrease, respectively.
M&A strategies can help navigate turbulence
Despite the slowdown in activity, it’s not all doom and gloom. Markets are resilient. They will continue moving forward as companies and investors adjust to the volatility and seek new opportunities. In their half-yearly M&A report, experts at PwC have predicted a rebound of activity into the second half of the year, driven by relatively cheap debt and the abundant dry powder that private equity backed buyers are sitting on. As soon as firms have more visibility over which parts of the market will benefit from the new normal, they will be ready - and eager - to spend.
The pandemic has spurred broader progressive change, giving people and businesses alike a renewed focus on positive social impact, and driving governments to shift their priorities. Divestment will help companies strengthen portfolios and bring attention back to core business.
‘We're seeing an acceleration of strategic decisions to enhance portfolio optimisation, as dealmakers divest to free up capital to focus on acquiring capabilities and transforming core business areas through M&A,’ says Malcolm Lloyd, Global Deals Leader, Partner, PwC Spain.
As we approach a near-constant state of chaos and volatility, M&A strategies will continue to help businesses respond to turbulence. M&A will continue to play a critical role for buyers and sellers alike as they seek to future-proof their businesses.
More data, more insights
For more real-time data across all transaction types and industries, download the FY23 Deal Indicators Report.
