As the end of the year approaches, we will provide an overview of the global M&A market in 2022, as well as some perspectives for 2023.
Even though the year is not over yet, it is already possible to have a good overview of the market from the last 3 quarters, when M&A activities showed a decrease both in the aggregate value of transactions and in the number of deals that were announced. In terms of the value of transactions announced until the end of the 3rd half of 2022, there was a decrease of 34% compared to the same period in 2021. In relation to the number of deals, this value fell by 12%, going from 42,360 transactions to 37,284. According to S&P, this slowdown in the M&A world is related to 3 main factors: i. Global inflation, and the indirect effects on business financing; ii. Market volatility; iii. The war in Ukraine.
Still, some high-value transactions have been announced, the two most notable being in the communications and technology sectors, with Microsoft acquiring Activision/Blizzard and VMware being acquired by Broadcom. The combined value of the two transactions exceeds $150 billion.
In relation to the sectors of the economy, the Industrial and Technology sectors are the two that led in added value, but it is worth highlighting the drop of more than 50% in the financial sector in both aspects, with a total of USD 362 billion this year compared to USD 723 billion in the same period of 2021.
Finally, expectations for 2023, also according to S&P, are that the decline in M&A activity in 2022 will not show a turnaround in the short term. The combination of high interest rates and lower valuations on companies' equity tends to make it more difficult for key stakeholders to carry out deals. With the rise in interest rates, there is an increase in the cost of acquiring financing, causing players such as private equity firms to leave the spotlight for acquisitions. And, with lower valuations, companies are not issuing new shares on the market, making financing for M&A more difficult. Furthermore, the forecast of a decline in global economic activity creates a less favorable environment for growth, which causes a lack of confidence in executives, a key factor for carrying out new deals. All of this leads to a scenario without high expectations for the M&A sector.
