Global mergers and acquisitions continue to face headwinds but are expected to rise in the second half of 2023. Digitalisation for many businesses remains a key focus. Software deals will continue to dominate technology, media and telecom (TMT). Other areas which will likely be hot spots of M&A activity in 2023 include telecoms, the metaverse and video games, consultancy PwC predicts in Global M&A Industry Trends Outlook.
The outlook says EMEA outperformed the Americas and APAC in 2022 in deal numbers. TMT remains the most active sector for M&A, with a quarter of global deal volumes and values in 2022.
“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.”
“While global deal activity remains clouded by macroeconomic volatility including recession fears, rising interest rates, a steep decline in equity valuations, geopolitical tensions including the war in Ukraine, and supply chain disruptions, three-fifths (60%) of global CEOs say they are nevertheless not planning to delay deals in 2023.”
The report says 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.
“However, the impact of various macroeconomic and geopolitical factors has not impacted M&A markets uniformly. India, for example, was an outlier in 2022, seeing activity rise by 16% and volume by 35% – to an all-time high – compared to double-digit declines in the US, China and many other territories.”
“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, says Brian Levy, Global Deals Industries Leader, PwC US.
- Technology, Media and Telecommunications (TMT): Digitalisation for many businesses remains a key focus. 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, CRO/CDMO, MedTech, consumer-facing healthcare and digital health solutions are expected to attract strong investor interest.