M&A rebound ahead in 2023 as market conditions stabilise: BMS

Despite the challenging macroeconomic environment of 2022, the global M&A landscape has proved resilient and is expected to rebound in 2023, according to a new report by  BMS highlighting key findings across the European, North American and Asian M&A markets.

Despite the Covid-19 pandemic, war in Ukraine, concerns around recession and higher interest rates, private equity and corporates continue to find opportunities. Deal volumes have dropped in comparison to the highs achieved in 2021 and early 2022, yet BMS is optimistic that M&A activity will pick up in the second half of 2023.

The report reveals a growing appetite for M&A insurance products, with BMS witnessing a 40% increase in purchases over the past two years.

Deal size has been affected by the slowdown in M&A activity coupled with a rise in interest rates, with insurers noticing a reduction in enterprise value as investors are less able to commit to high deal multiples.

Reinsurers have been forced to take greater measures to mitigate the risk of policies issued during the pre-2022 M&A boom, leading to lower limits on primary policies and a higher percentage of excess policies.

Renewables and infrastructure sectors have proved resilient, with an 8.7% rise in deal volume in 2022, while the secondaries market remained buoyant in 2022, with a total transaction volume of over $100 billion for the second year in a row.

Although Europe's M&A activity tailed off in the latter half of 2022, the tax insurance market saw a record number of enquiries.

Analysts have warned that a potential global recession in 2023 could lead to a spike in distressed sales.

Tan Pawar, head of private equity and M&A at BMS, said: “2023 has gotten off to a subdued start compared the deal activity levels seen over the past two years. However, momentum is growing, and we have not seen a decrease in enquiries from companies eager to obtain M&A insurance. With market conditions expected to stabilise, we should see a resurgence in deal activity by the end of Q2 and into the second half of 2023.”

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