How low can it go? Global M&A plunges again in 3Q22
Mergers and acquisitions took a sharper downturn in the third quarter as the world continued to grapple with soaring inflation and hopes of a soft landing evaporated.
If 2022’s fourth quarter is anything like its third, then 2022 may struggle to beat pandemic-ravaged 2020’s tally of USD 3.6tn. For the first nine months of 2022, global transactions reached USD 2.97tn – about a third down from the same period during 2021’s record year and roughly level with the comparable period in pre-pandemic 2019.
Global dealmaking in 3Q22 dropped to USD 722bn – a 54% decline from a year earlier and 38% down sequentially from 2Q22. The 6,916 transactions in 3Q22 were also 32% lower year-on-year and 26% down sequentially. It makes 3Q22 the worst quarter since 2Q20, when the start of the pandemic halted dealmaking.
The 3Q22 slowdown affected all regions. North America fared worst, with M&A plunging by 63% year-on-year to USD 273bn as summertime hopes of a stock market rebound ebbed when the Federal Reserve doubled down on monetary tightening to tamp stubborn inflation. Europe’s fell by 41% to USD 207bn over the same period as an energy crisis roiled the continent. Asia-Pacific fell by 51% to USD 192bn as China’s zero-Covid policy gummed up supply chains and a real estate crisis threatened its economy.
In a sign of just how much activity has soured, eight of the year’s top 10 deals took place between January and May. Only consumer healthcare company Haleon’s USD 30.9bn spinoff to shareholders in July and Figma’s USD 20bn sale to Adobe [NASDAQ:ADBE] in September took place afterwards.
Two top 10 deals are already unravelling: Elon Musk will battle Twitter [NYSE:TWTR] in court this month as he fights to unwind a USD 44bn deal to buy the social media company. KKR also pulled its USD 20.5bn all-cash bid for Australia’s Ramsay Health Care in September, five months after first agreeing it. During 1Q-3Q22, 185 deals worth USD 239.3bn were cancelled compared with 428 transactions totaling USD 475bn abandoned in 1Q-3Q21. In the current volatile environment, more deals could collapse.
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