ANALYSIS: Dismal Q3 M&A Deal Volumes Dampen End-of-Year Outlook

Following a brief uptick in global M&A activity, deal volumes have dropped again, and Q3 2023’s performance might deflate hopes that Q2 2023 was the start of an M&A market rebound.

Global M&A deals (covering a wide variety of transaction types) announced in Q3 2023 totaled just $641 billion, which was the lowest third-quarter volume since 2013. To make matters worse, 2023’s total global M&A deal volume through Q3 ($1.95 trillion) was almost $1 trillion lower than the same span in 2022 ($2.91 trillion) and was the lowest three-quarter total since 2013 ($1.77 trillion).

Global M&A deal volumes have broken $3 trillion in every year for the past decade, and the results from Q3 seem to make it likely that 2023 will be the first year since 2013 ($2.37 trillion) to fail to break this threshold. Q4 2023 would need to reach a global M&A deal volume of at least $960 billion for the quarter alone, which last occurred in Q2 2022 ($1.13 trillion). In contrast—and likely a better benchmark for potential deal volumes as we close out 2023—last year’s fourth quarter failed to show a bump in Q3-to-Q4 deal activity for the first time in years.

Some observers, like Bloomberg’s Claire Ruckin and Swetha Gopinath, have found signs that M&A activity is picking up, including financing markets opening up to some larger deals; buyers and sellers “getting more realistic on pricing,” which could make it easier for companies to negotiate a transaction; and a narrowing gap between last year’s deal volumes.

Despite these potential bright spots, which also include a couple of mega deals announced in September and some positive views on deal appetites from big banks, I am not very optimistic about the global M&A market’s chances of hitting the $3 trillion mark, given Q3’s reversal in performance.

Regional totals further demonstrate how bad Q3 was for global M&A activity. Every target region saw Q2-to-Q3 2023 decreases in deal volumes, and even some target countries that I thought may be bright spots after their Q2 performances—like Germany, India, and Japan—saw drops in M&A activity in Q3.

However, in a notable development—and bucking the trends I’ve previously examined here, as well as supporting Ruckin’s and Gopinath’s optimistic views of the M&A market’s potential end-of-year finish—was the Q3 2023 performance of US targets. M&A deal volumes for US targets increased from Q2 ($294 billion) to Q3 ($304 billion) and comprised 49% of total global M&A deal volumes for Q3 2023.

Though that increase from Q2 to Q3 was relatively modest, the market share for US targets cannot be ignored, and an active Q4 for US targets may give the global M&A market a boost as we finish 2023.

The numbers for US targets made me slightly more hopeful, but I still think 2023’s annual M&A deal volume will be lower than 2022’s, and will fail to meet the $3 trillion benchmark for the first time in a decade.

Bloomberg Law subscribers can find related content on our M&A Deal Analytics resource.

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