Deloitte M&A Index 2023 Q1-Q2
The number of European transactions in the second quarter of 2023 will fall by 13.3%.
In the second quarter of 2023, ongoing negative macroeconomic factors such as persistent inflation, higher interest rates, slowing economic growth and continuing supply chain disruptions will result in a further significant decline in merger and acquisition activity. Turbulence in the banking markets and its impact on consumer confidence also contribute significantly to the results for the second quarter. The index predicts 2,805 announced transactions for the second quarter of this year. In the first quarter of 2023, there were a total of 3,237 transactions, so the model predicts a 13.3% decline. The model's optimistic scenario, which takes into account an unlikely but possible positive shock in consumer confidence and stock markets, still allows for a potential slight increase in the number of market transactions of 3.8% (q/q). So, even though we expect the number of M&A transactions to slow down in 2023, we think the markets could still be ready for a quick recovery.
The total value of transactions (measured as the sum of the values of transactions completed over the last twelve months) also decreased, from USD 669 billion to USD 607 billion.
The prevailing geopolitical and economic uncertainty is expected to continue to influence market dynamics this year. However, strategic and financial investors continue to show strong interest in mergers and acquisitions involving significant targets in Europe. Going forward, investors are likely to focus on seeking investments in companies that have a significant market position, strong financial results and a functional business strategy.
‘Despite the cooling of the M&A market, there is still potential for a market recovery this year thanks to several factors, such as significant financial resources from private equity funds and strategic players, as well as the easing of the energy crisis,’ explains Jan Brabec, partner in Deloitte's financial advisory department.
Investors are also expected to carefully evaluate their corporate portfolios and consider divesting non-core assets as part of ongoing transformation strategies. In addition, the consolidation trend may continue, particularly in unexplored territories of emerging markets in Europe and elsewhere, presenting numerous opportunities for large-scale consolidation in the new economic reality. Persistent economic uncertainty may bring opportunities for acquisitions of companies in financial distress and purchase opportunities for businesses seeking to expand and grow. Over-indebted companies may be available for acquisition at a reduced price, allowing financially stable companies to purchase them and gain access to new markets or technologies.
‘Geopolitical and economic uncertainty continues to affect market dynamics this year, but there are signs of gradual stabilisation. Investors are looking for value in companies with strong market positions and business plans. Consolidation may continue in emerging markets, bringing many opportunities,’ adds Miroslav Linhart, lead partner in Deloitte's financial advisory department.
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