Global M&A trends and risks

Powerful new forces shaping the M&A landscape

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The macroeconomic shocks of 2022 had an outsized impact on M&A dealmaking. While headwinds continue to swirl, there are tentative grounds for optimism and a growing consensus that 2023 will see a return to M&A growth.

Speaking with over 200 of the most senior executives from multinational corporates, large private equity (PE) firms and major investment banks, we examine trends for the year ahead regionally and offer a prognosis for M&A globally, as we look further into 2023 and beyond.

Understand the factors impacting global M&A decision making and investor outlook

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Report headlines

Dealmakers upbeat about prospects for 2023

“People are kicking the tyres a bit harder, especially if there are limited buyers for a particular company or asset. But the deal pipeline we are seeing for the second half of the year looks better than the first.” Chris Hersh, Head of antitrust and competition - Canada

Tougher regulation and political risk are front of mind for dealmakers

“Insurers are now working in areas that they may not have been as comfortable with in the past – energy and healthcare are examples. W&I for technology deals is also ripe for growth, particularly as multiples come down and the gap shrinks between what sellers are expecting and what buyers are willing to pay.” Scarlet McNellie, Head of corporate, M&A and securities - US

Financing is expected to be tighter in 2023

“A lot of activity in Europe and the Middle East is driven by PE, and PE is reliant on debt. The debt markets are more problematic now. Nobody foresaw the banking crisis, or the pace at which interest rates have risen. Those two factors contribute to people being a little bit more nervous about activity in the M&A market.” Raj Karia, Head of corporate, M&A and securities - EMEA

Regulation creates opportunities as well as threats

“A really interesting behavior we are starting to see is reverse warranties being sought under ESG. A seller may want to demonstrate to their own stakeholders that they haven’t divested to someone who is not committed to appropriate behaviors.” Claire O’Donnell, Partner - London.

Outlook

There are signs that inflationary pressures are beginning to ease, at least in developed markets, thanks in great part to retreating energy prices. Consequently, the cycle of central bank interest rate hikes is expected to level off, and perhaps even begin to reverse, towards the end of the year.

While dealmakers remain wary of threats lurking in the immediate economic environment – not least in the banking sector – expectations of an uptick in M&A activity are mounting. “In global markets, deal appetite will increase considerably in the second half of 2023,” predicts the managing director of a US investment bank. Others also expect to see notable M&A growth in H2: “By midyear, dealmakers will start considering more cross-border deals to diversify their holdings,” says a partner of a UK buyout firm.

Green shoots of recovery are already appearing. The private equity space, for example, saw deal volume jump 15 percent quarter on quarter in Q1 2023 with a total of 1,769 transactions – the third-highest Q1 deal count according to records going back to 2006. “Private equity firms will continue to invest in familiar markets at the same pace as in 2022. They are intent on making new acquisitions and supporting the performance of their platform companies,” forecasts the managing director of a US-based private equity firm.

M&A activity is heavily influenced by cyclical economic drivers. But it is also shaped by non-cyclical factors that are driven by deep-rooted shifts in technology, legislation and investor appetites. Long-term trends of this sort will always drive deals – even when markets are down.

Asked to identify which major M&A themes they expect to see come to the fore globally in 2023, respondents point to three areas in particular.