25 Jan 2023
NEW YORK, 25 January 2023 – Global M&A activity will likely rise in the second half of 2023 as investors and executives look to balance short-term risks with their long-term business transformation strategies, according to PwC’s 2023 Global M&A Industry Trends Outlook.
While global deal activity remains clouded by macroeconomic volatility including recession fears, rising interest rates, a steep decline in equity valuations, geopolitical tensions including the war in Ukraine, and supply chain disruptions, three-fifths (60%) of global CEOs say they are nevertheless not planning to delay deals in 2023, according to PwC’s 26th Annual Global CEO Survey.
The global M&A market faced a challenging 2022 with M&A volumes and values declining from record-breaking highs (65,000 deals) in 2021 – respectively by 17% and 37% – although remaining above 2020 and healthy pre-pandemic levels. In the second half of 2022, deal volumes and values declined by a greater portion – by 25% and 51%, respectively – compared to the year prior. However, the impact of various macroeconomic and geopolitical factors has not impacted M&A markets uniformly. India, for example, was an outlier in 2022, seeing activity rise by 16% and volume by 35% – to an all-time high – compared to double-digit declines in the US, China and many other territories.
The outlook finds that M&A – and particularly portfolio optimisation – continues to represent a strategic opportunity for market players – irrespective of challenging macroeconomic and geopolitical factors – and remains a tool to help CEOs reposition their businesses, bolster growth and achieve sustained outcomes over the longer-term.
Now is not the time to fall out of love with M&A. M&A tends to slow during times of uncertainty or market volatility – but those can be precisely the times when valuations become more attractive and opportunity knocks. A reset in valuations, lessened competition for deals, and new assets coming to market – including from distressed situations – present real opportunities for buyers to achieve better returns and even outsized growth. Provided companies have well-thought-out strategies and access to capital (and in some cases the courage) to make transformational deals – deals that will shape their business and contribute to their longer-term success – the current market can provide an opportune moment for M&A plays.”
Global M&A activity in 2022 varied by region, with more deals in EMEA in 2022 than in the Americas and APAC regions – despite higher energy costs and regional instability – highlighting a shift by investors to find opportunities and growth in other markets.
In EMEA, deal volumes and values declined by 12% and 37%, respectively, between 2021 and 2022. With approximately 20,000 deals in 2022, activity in the region remained 17% higher than pre-pandemic 2019 levels.
In the Americas, (approximately 18,000 deals) deal volumes and values declined by 17% and 40%, respectively, between 2021 and 2022. Deal values were particularly hard-hit and the number of US megadeals – transactions with a value exceeding US$5bn – almost halved from 81 to 42 between 2021 and 2022, respectively. The decline in the second half of the year was more acute, with just 16 megadeals compared to 26 in the first half of 2022.
In the Asia-Pacific (approximately 16,000 deals), volumes and values declined by 23% and 33%, respectively, between 2021 and 2022. The greatest declines were observed in China – impacted by COVID-19 challenges and weakening demand for exports – where deal volumes and values decreased by 46% and 35%, respectively. Companies seeking access to Asian markets are increasingly looking beyond China – to India, Japan and other countries within Southeast Asia – for investment opportunities. India has emerged as an increasingly attractive destination for investment, overtaking Japan and South Korea in deal values to rank second in the region behind China.
Macroeconomic volatility and geopolitical conflict are not having a uniform impact across industries. The following industry dynamics will create opportunities for M&A in 2023:
Macroeconomic and geopolitical volatility will also impact market players differently, creating advantages for some, and challenges for others:
“There are plenty of reasons to be positive about M&A deal activity as we enter 2023. CEOs will have dealmaking firmly on their agendas as businesses continue to optimise their portfolios and consider how strategic M&A can help drive growth and their transformation journey.”
Managing Director, Global Corporate Affairs & Communications, PwC United States
PwC’s Global M&A Industry Trends Outlook is a semi-annual analysis of global deals activity across six industries – consumer markets (CM), energy, utilities and resources (EU&R), financial services (FS), health industries (HI), industrial manufacturing and automotive (IM&A), and technology, media and telecommunications (TMT).
About the data: Commentary on M&A trends is based on data provided by industry-recognised sources. Specifically, values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by Refinitiv as of 31 December 2022 and as accessed on 2 January 2023. This has been supplemented by additional information from Dealogic, Preqin, S&P Capital IQ and PwC’s independent research and analysis. The publication includes data derived from data provided under license by Dealogic. Dealogic retains and reserves all rights in such licensed data. Certain adjustments have been made to the source information to align with PwC’s industry mapping.
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