Sunday, January 29, 2023

Global M&A activity falls 36% in the second half of 2022

Over the previous six months, worldwide merger-and-acquisition (M&A) activity has dropped to an all-time low.

The value of worldwide M&A deal-making plummeted from $2.2 trillion in the first half of 2022 to $1.4 trillion in the second half, according to the Financial Times (FT), citing statistics from data provider Refinitiv. According to the study, this is the largest movement — up or down — since the business began collecting data in 1980.

The volume of M&A activity was also lower. According to the research, the number of agreements completed globally in 2022 was 36% lower than in 2021 — the greatest dip recorded since 2001 — although it remained higher than in 2016 and 2017.

The research ascribed the sharp reduction in M&A activity to weaker global market confidence and increased financing costs, adding that activity will reach a new peak in 2021 as a result of stimulus measures and interest rate cuts undertaken in reaction to the epidemic.

According to the research, more regulatory scrutiny, slower deployments by private equity firms, and banks’ reduced capacity to finance new investments have all contributed to the dip. In one recent example of the tendency, special purpose acquisition company (SPAC) Crypto 1 Acquisition Corp. declared on Dec. 9 that it would dissolve and liquidate.

The move happened one year after the company’s $230 million first public offering, as PYMNTS noted at the time (IPO).

“The company anticipates that the company cannot consummate an initial business combination within the time period required by its amended and restated memorandum and articles of association,” Crypto 1 Acquisition said. 

On the other hand, Latin America may see more M&A activity in 2023, with bankers expecting it to grow by as much as 20% in that year.

The report attributed this anticipated growth to investors looking at the region after moving away from activity in Russia and China — the former due to the war in Ukraine and the latter because of concerns about COVID, tensions with the United States, and a lack of transparency among Chinese firms. 

 

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