When doubts rise, dealmaking takes a hit.
Concerns that had simmered for months — the negative economic effects of virus lockdowns and potentially aggressive rate hikes — boiled over as war in Ukraine forced markets to price in a greater recession risk, dampening merger appetite.
Dealmakers were understandably reluctant to launch a takeover — the economy’s trajectory and rollicking markets confounded the best forecasters, undercutting confidence.
Still, many banking and capital markets executives took a wait-and-see attitude to deals. That suggests to us that once the doubts are resolved, corporate tie-ups could quickly return to satiate investors’ demand for growth and transformation as digitization expands. Clarity on interest rates or a significant change in deal valuations could revitalize merger activity.
A potential silver lining of the pause is that it may uncover opportunities obscured by today’s uncertainty.
There were 241 banking deals announced from November 15, 2021, to May 15, with a total disclosed value of $35 billion, including two big cross-border deals.
Small banks continued to make deals in the second quarter despite the uncertainty with buyers expanding their footprint to nearby markets where the population is growing, drawn by a better work-life balance or a lower cost of living.
Canadian banks use excess capital to expand in US
Deal headwinds versus opportunities
A look back at key transactions from the second half of 2021:
“While uncertainty slowed the pace of deals in the past few quarters, the attractive marketplace and strong fundamentals of banking and capital markets companies make it a sought-after industry for growth-oriented companies.”
Partner, PwC US