After an historic eight-quarter boom, the M&A brakes are on. A final hurrah at the start of Q2 2022 has been followed by consistent global declines through to the end of September. The year-to-date total, of $2.7trn, is a third smaller than the same period last year.
- During Q3 the total deal value of M&A has plummeted by 55 percent year-on-year, the largest fall since the global financial crisis in 2009.
- Cross-border M&A activity is dominated by North America (initiating 40 percent of cross-border deals) and the UK (10 percent of of global activity).
- September saw lowest banking fee haul since 2013. A total little more than half the number seen in March and June 2022
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The largest and longest M&A boom of recent times came to an abrupt end in the middle of 2022, with the aggregate value of Q3 acquisitions falling below $1trn for the first time in eight consecutive quarters.
Just $692bn of M&A deals from 11,738 transactions were announced world-wide in the third quarter; the lowest tally since Q2 2020, and a drop of 55 percent from the same period last year. This is the largest year-over-year decline since the depths of the global financial crisis in 2009.
By the end of Q3, 2022 had seen $2.7trn worth of M&A deals, down around one-third on last year, and an 17 percent fall in the number of transactions. Mid-market deals of between $1bn and $5bn have fallen 43 percent so far this year.
Meanwhile, the number of mega deals (of more $5bn) has been more than halved, to just 73 transactions so far this year. However, the biggest loser are SPAC combinations, which have plummeted some 85 percent year-over-year, to account for $77bn and contributing just 3 percent to the total global M&A figures.
North America remains dominant, at home and abroad
Regionally, the U.S. has been hardest hit, dropping 40 percent so far this year, to $1.2trn, but still comfortably surpassing Europe’s $712m in aggregate M&A (down 24 percent), and Asia-Pacific’s $621bn (down 30 percent).
India is the region’s only outlier, bucking the trend with strong gains by value and volume of deals.
North America remains the M&A powerhouse internationally, with U.S. and Canadian acquirers initiating 40 percent of all cross-border deals so far in 2022.
UK companies accounted for one-tenth of global activity, significantly punching above its weight by GDP, and UK companies were also the second most targeted in the world.
Meanwhile, Chinese companies took just 3 percent of cross-border acquisitions, and ranked seventh in terms of target companies, reflecting a much greater domestic focus for its deal-making community.
Financial investors get cold feet
Even private equity sponsors, who have been extremely active in the past two years by historical standards, slammed on the breaks in Q3.
Year-over-year, private equity buyouts are down by more than one-quarter to $654bn. This total so far equates to an unusually high 23 percent of M&A. However, since much of the retreat has happened since the mid-year point, its market share by year-end is likely to be significantly lower.
Decline in investment banking fee-take
Despite the general skittish nature of markets, 9 percent fewer deals have been withdrawn so far this year compared with the same period last year.
By value, some 45 percent of withdrawn deals involved a European target, most notably Unilever’s approach to GSK’s consumer division and Nvidia’s attempt to acquire Arm Ltd.
Even so, the declines in aggregate activity so far this year have hit investment banking profits.
January 2022 ended a run of 16 consecutive months of global investment banking fees surpassing $10bn – a feat only achieved subsequently twice, in March and June this year. This September achieved little more than half this level, amounting to the worst month for investment banking fees in nine years.
U.S. bankers shared 41 percent of the global fee pool, while their European counterparts took just one-fifth of the total fee pool, an all-time low (since records began in 2000). At 27 percent, Asia-Pacific deal-makers enjoyed their highest share ever.
Boutique advisory firms accounted for 35 percent of the total, just surpassing that of the top five bulge bracket banks.
