62% of Irish CEOs are not planning to delay M&A deals in 2023: PwC 2023 Global M&A Industry Trends Outlook

Global M&A activity will likely rise in the second half of 2023 as investors and executives look to balance short-term risks with their long-term business transformation strategies, according to PwC’s 2023 Global M&A Industry Trends Outlook.

While global deal activity remains clouded by macroeconomic volatility, rising interest rates, a steep decline in equity valuations, geopolitical tensions including the war in Ukraine and supply chain disruptions, 62% of Irish CEOs (Global: 60%) say in PwC’s 2023 Global CEO survey that they are, nevertheless, not planning to delay deals in 2023.

The global M&A market faced a challenging 2022 with M&A volumes and values declining from record-breaking highs (65,000 deals) in 2021 – respectively by 17% and 37% – although remaining above 2020 and healthy pre-pandemic levels. In the second half of 2022, deal volumes and values declined by a greater portion – by 25% and 51%, respectively – compared to the year prior. 

The latest outlook finds that M&A – and particularly portfolio optimisation – continues to represent a strategic opportunity for market players – irrespective of challenging macroeconomic and geopolitical factors – and remains a tool to help CEOs to reposition their businesses, bolster growth and achieve sustained outcomes over the longer-term.

Paul Tuite, Leader, PwC Ireland Deals Practice, said: “Despite the many uncertainties and risks impacting Ireland’s economy, our recent Irish CEO survey highlights that Irish CEOs are confident about their own businesses. Irish CEOs are also more confident about Ireland's economy than global CEOs are about the global economy which reflects the relative strength of the Irish economy at the moment. Ireland’s economy remains in a good position.  With strong fiscal returns, continued foreign direct investment flows, a thriving export sector, high employment levels and indications that inflation may be easing, there are solid reasons why six out of ten Irish CEOs are not planning to delay M&A deals in 2023. They continue to look for growth opportunities to secure sustainable businesses for the future. 

“And now is not the time to fall out of love with M&A. M&A tends to slow during times of uncertainty or market volatility – but those can be precisely the times when valuations become more attractive and opportunity knocks. A reset in valuations, lessened competition for deals and new assets coming to market – including potentially from distressed situations – present real opportunities for buyers to achieve better returns and even outsized growth. Provided companies have well-thought-out strategies and access to capital (and in some cases the courage) to make transformational deals – deals that will shape their business and contribute to their longer-term success – the current market can provide an opportune moment for M&A plays.”

Global M&A Activity in 2022 

Global M&A activity in 2022 varied by region, with more deals in EMEA in 2022 than in the Americas and APAC regions – despite higher energy costs and regional instability – highlighting a shift by investors to find opportunities and growth in other markets.

In EMEA, deal volumes and values declined by 12% and 37%, respectively, between 2021 and 2022. With approximately 20,000 deals in 2022, activity in the region remained 17% higher than pre-pandemic 2019 levels.

In the Americas, (approximately 18,000 deals) deal volumes and values declined by 17% and 40%, respectively, between 2021 and 2022. Deal values were particularly hard-hit and the number of US megadeals – transactions with a value exceeding US$5bn – almost halved from 81 to 42 between 2021 and 2022, respectively. The decline in the second half of the year was more acute, with just 16 megadeals compared to 26 in the first half of 2022.

In the Asia-Pacific (approximately 16,000 deals), volumes and values declined by 23% and 33%, respectively, between 2021 and 2022. The greatest declines were observed in China – impacted by COVID-19 challenges and weakening demand for exports – where deal volumes and values decreased by 46% and 35%, respectively. Companies seeking access to Asian markets are increasingly looking beyond China – to India, Japan and other countries within Southeast Asia – for investment opportunities. India has emerged as an increasingly attractive destination for investment, overtaking Japan and South Korea in deal values to rank second in the region behind China.

Global M&A Outlook for 2023

Macroeconomic volatility and geopolitical conflict are not having a uniform impact across industries. The following industry dynamics will create opportunities for M&A in 2023: 

• Technology, Media and Telecommunications (TMT): Digitalisation for many businesses remains a key focus. Despite recent staff layoffs in the tech sector, software deals will continue to dominate the sector – as much as they did in 2022 – having accounted for two-thirds (71%) of tech deal activity and three-quarters (74%) of deal values. Other areas which will likely be hot spots of M&A activity in 2023 include telecoms, the metaverse and video games.
• Industrial Manufacturing and Automotive (IM&A): Portfolio optimisation will drive divestitures and acquisitions, particularly those focused on sustainability and accelerating digital transformation.
• Financial Services (FS): Disruption from platforms and FinTech is driving rapid technological changes across FS and will boost M&A as players seek to acquire digital capabilities.
• Energy, Utilities and Resources (EU&R): Energy transition will remain a priority for investors and management teams, directing large volumes of capital to M&A and other capital project development.
• Consumer markets: While challenges remain on the consumer front in 2023, portfolio reviews and a focus on transformational transactions will create M&A opportunities
• Health industries: The need to innovate and transform businesses to achieve growth goals will drive M&A activity in 2023. Biotech, Contract Research Organisations (CRO) and Contract Development and Manufacturing Organisations (CDMO), MedTech, consumer-facing healthcare and digital health solutions are expected to attract strong investor interest.

Macroeconomic and geopolitical volatility will also impact market players differently, creating advantages for some, and challenges for others:

• Corporates: Strong balance sheets will present an opportunity for corporates given tight financing conditions.
• Private Equity: PE will be looking at new deals and will be focused on creating value in their portfolio companies, which in turn will involve optimisation, build-ups, and divestitures.
• Special Purposes Acquisition Companies (SPACs): While SPACs raised approximately $230bn in capital through IPOs since 2020, increasingly more are struggling to close deals, and many are likely to run out of time.
• Credit Funds and Private Markets: Their lending will gain M&A share from banks and become key to providing much-needed liquidity, particularly in mid-market deals.
• Venture Capital: VC may retreat from some riskier investments, but climate tech investing remains a potential bright spot with more than one-quarter of all VC funding now going to climate technologies, especially those focused on cutting emissions.

Mark McEnroe, Partner, PwC Ireland Deals Practice, concluded: “There are plenty of reasons to be positive about M&A deal activity for 2023. CEOs will have dealmaking firmly on their agendas as businesses continue to optimise their portfolios and consider how strategic M&A can help drive growth and their transformation journey.”

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