Global Dealmakers: M&A Outlook 2023
Global dealmakers experienced a challenging year in 2022. The Ukraine conflict, rising interest rates, climbing inflation and choppy equity markets dampened risk appetite and put deals on the backburner after a bumper year of activity in 2021. Global deal value declined by almost a third (31%) from US$5.82tn in 2021 to US$3.96tn in 2022.
Despite all the headwinds, cross-border M&A has remained particularly relevant for businesses looking for opportunities to expand their technical capabilities and grow geographic reach. In this research, we explore the outlook for global M&A in 2023 and beyond. Our research finds that dealmakers are overwhelmingly optimistic, with the majority planning to increase deal activity during the next 12 months. We look into the tactics and strategies dealmakers are implementing to sustain deal flow in what is still a tough market and explore some of the key drivers and challenges that will influence their decisions.
- Global deal value declined by almost a third (31%) from US$5.82tn in 2021 to US$3.96tn in 2022.
- Cross-border and domestic deal values experienced a similar slump, recording year-on year declines of 36% and 29%, respectively.
- In contrast to M&A overall, mid-market M&A saw deal numbers climb by 9%, while value dropped just 7%, compared to a 31% drop across the board. Dealmakers are increasingly turning to the midmarket to capture value and harness synergies.
- 52% of respondents say global M&A will increase in the year ahead.
Tech the strongest sector
With digital transformation a core priority, the technology, media and telecommunications (TMT) space stands out as the top sector for M&A. Interest is set to remain steady and strong: close to two-thirds of respondents (61%) say they will focus investments in TMT over the next two years as they use these deals to catalyse change and inject a dose of innovation into business operations.
In contrast to a buoyant TMT, traditional M&A hotspots such as real estate, mining, and energy continue to have an uncertain outlook, driven very much by the state of the asset and its context. “Traditional sectors like real estate and energy continue to have an uncertain outlook. Some commercial real estate investments have been left stranded by the changing nature of work, transport and operations during the COVID-19 years. There’s an ongoing need in Europe, particularly to shed olderstyle buildings that have high-energy requirements. Real estate is expected to bear the brunt of an increase in distressed sales, with construction not far behind. Energy and resources sector companies also face ESG headwinds; however, the opportunity remains strong for those that have been reducing their emissions and improving sustainability performance, “ Baker Tilly Belgium Corporate Finance Partner Olivier Willems says.
Expectations for 2023
Our research finds that dealmakers are overwhelmingly optimistic, with the majority planning to increase deal activity during the next 12 months. Respondents also say mid-market deals (those valued between US$15m-US$500m) will drive M&A in the year ahead. Geopolitical conflicts, like the conflict in Ukraine, remain a source of uncertainty and may impact cross-border deals.