Mergers and acquisitions activity in the Europe, Middle East and Africa (Emea) region is expected be “meaningfully up” in the second half of 2023, an industry expert has said.
Total global M&A activity was $1.36 million in the first half of this year, a figure which includes actual data up to June 16, and projected data to the end of June, according to a new report from Bank of America. The figure is down from $2.34 trillion in the corresponding period last year. In the Emea region risk appetite is increasing among investors, according to the report.
“We’ve essentially had five quarters in the reset of deal pricing dynamics. Rationality and balance increasingly prevail between buy-side and sale-side, which is the bedrock of being able to sensibly calibrate and price business plans,” Eamon Brabazon, co-head of Emea M&A at Bank of America, said.
Among the M&A deals that have taken place so far this year was Liberty Mutual agreeing to sell its personal lines and small commercial insurance business in Spain, Portugal and Ireland to Generali (one of the largest global insurance and asset management providers, operating primarily in Europe, the Middle East and East Asia) last June. In April, the British wealth manager Rathbones agreed a deal to buy Investec Wealth & Investment UK for £839 million.
Well capitalised corporations are continuing to pursue strategic ambitions via M&A, according to the report. It also found that there had been a shift of deal size $5-10 billion to $1-5 billion in the Emea region.
While in Ireland (an EU country) – at the time of writing this report – I gathered M&A deal volumes have experienced a decline during the first half of this year, compared to the corresponding period in 2022, according to a report from Renatus (private equity firm, providing information, accounts, annual return, etc).
The report said that deal making had been impacted by inflation, interest rates and soaring energy prices. A total of 198 deals were reported here in the first half of this year, compared to 226 in the first half last year, Renatus found.
Globally, fears of a deep recession have weighed on M&A activity. However, this is beginning to fade, according to the Bank of America report. The report also found that enhanced regulatory scrutiny is reducing certainty and or delaying the timing of M&A. However, investors remain well capitalised.
There are two main reasons for the drop in M&A activity this year, according to Brabazon. “The first was relative: 2022 enjoyed the highest M&A deal volume in history and hence 2023 has a tough year-on-year comparable. The second reason was that the general economic slowdown and heightened geopolitical uncertainty which hit elevated levels towards the back end of 2022,” he said.
“This created a temporary brake on deal activity in half one 2023 as the M&A market grappled with higher interest rates and robust inflation. We’ve now passed peak uncertainty and we are poised for a material rebound in European M&A,” Brabazon added.
In the Americas, deal-making this year to date by volume slowed relative to 2022, according to the report. Only energy and power, healthcare and financial institutions saw year-over-year volume growth. Technology, which had the largest deal value contribution in 2022, is down a massive 78 per cent year-on-year.
After a 17-year low in 2022 for upstream oil and gas transactions, high oil prices and capital discipline are setting the stage for “robust” M&A activity this year. Looking forward, there is increasing optimism regarding the depth and length of looming recession in the Americas, according to the report. In addition, there is an “abundance of capital. (The writer is our foreign correspondent based in the UK)
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