After the M&A market’s disappointing end to 2022, many predicted that the slowed deal activity would carry over to 2023 and that it would be another down year. Even those who thought 2023 might get off to a slow start, staying closer to 2022 levels, could have thought that deal volumes would ultimately mimic pre-2021 levels. It was hard to imagine M&A deal volumes dropping lower than those at the end of 2022, but that is exactly what happened.
Pending and completed M&A transactions—covering a wide variety of transaction types, including minority stake transactions and venture capital financing rounds—plunged even further from Q4’s meager finish to 2022. Q1 2023 had a global deal volume of $559 billion, the third-lowest global quarterly M&A deal volume in the last 10 years; only Q1 2013 ($502 billion) and early-pandemic Q2 2020 ($442 billion) had lower quarterly deal volumes.
Controlling-stake mergers and acquisitions did not fare any better than M&A transactions overall. Indeed, Q1 2023’s controlling-stake M&A deal volume ($384 billion) was the lowest total for a Q1—and the second-lowest for any quarter—since 2013.
There were no true bright spots for any deal sizes, either. All market segments for global M&A transactions saw further decreases in their respective deal volumes from Q4 2022 to Q1 2023.
Small deals (total value of less than $100 million) experienced their worst quarter in at least five years. Middle market deals (total value of $100 million to <$1 billion) and large deals (total value of $1 billion to <$10 billion) did almost as poorly; only pandemic-riddled Q2 2020 was worse for those segments. As for mega deals (total value of $10 billion or more), they had the third-lowest quarter in the last five years; the only two quarterly totals lower than Q1’s $101 billion were Q2 2020 ($43 billion) and Q3 2022 ($60 billion).
Some large deals have been announced in the first few days of April, so maybe that signals a better start to Q2. For example, Endeavor Group Holdings Inc. announced it would acquire World Wresting Entertainment Inc. for more than $8 billion on April 3—part of a combined enterprise valued at $21.4 billion where WWE and Endeavor’s Ultimate Fighting Championship would merge and form a new company that would be controlled by Endeavor. L’Oreal SA also announced a $2.53 billion acquisition of Aesop Inc., an Australian cosmetics brand, on April 3. We also are hearing signs of enthusiasm from those who are shifting to a middle-market deal strategy.
Perhaps middle-market and large deals will help the M&A market start to pick up, but companies are still contending with economic uncertainties, the aftermath of a mini banking crisis, and the possible growing allure of other deal structures like spinoffs. All in all, it may take longer than expected for global M&A deal volumes for more traditional transactions to bounce back.
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