Advisory and consulting firm PwC Cyprus on Monday released a report detailing the prevailing trends in terms of mergers and acquisitions across the world throughout the coming year.
According to the company’s 2023 Global M&A Industry Trends Outlook, activity in this sector will likely increase in the second half of 2023, primarily because investors and executives will seek 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 per cent) of global CEOs say they are nevertheless not planning to delay deals in 2023,” the survey said.
What is more, according to the results of the survey, the global M&A market faced a difficult 2022, with M&A volumes and values declining from their record-breaking high of 65,000 deals in 2021.
Mergers fell by 17 per cent and acquisitions fell by 37 per cent in 2022, which still places them above 2020 levels, while they also remain healthy when compared to pre-pandemic levels.
In addition, during the second half of 2022, deal volumes and values declined by a greater percentage, falling by 25 per cent and 51 per cent respectively. compared to the year prior.
“The impact of various macroeconomic and geopolitical factors has not impacted M&A markets uniformly,” the report explained, noting that India, for example, was an outlier in 2022.
India experienced higher activity, which rose by 16 per cent, combined with higher volume, which increased by 35 per cent, compared to double-digit declines in the US, China and many other territories.
“The 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 reposition their businesses, bolster growth and achieve sustained outcomes over the longer-term,” PwC stated in their report.
Furthermore, the report explained that macroeconomic volatility and geopolitical conflict are not having a uniform impact across industries, with a number of industry dynamics expected to create opportunities for mergers and acquisitions in 2023.
The first area of potential opportunity that the survey identified is that of technology, media and telecommunications.
“Digitalisation for many businesses remains a key focus,” the report said.
According to the data, software deals will continue to dominate the sector in the same way they did in 2022, having accounted for two-thirds (71 per cent) of tech deal activity and three-quarters (74 per cent) of deal values.
“Other areas which will likely be hot spots of M&A activity in 2023 include telecoms, the metaverse and video games,” the company noted.
In terms of industrial manufacturing and the automotive sector, the survey noted that “portfolio optimisation will drive divestitures and acquisitions”, especially those focused on sustainability and accelerating digital transformation.
In the financial services sector, disruption from a number of platforms, combined with the ongoing growth of FinTech, are both expected to drive swift technological changes, boosting mergers and acquisitions as players move to acquire digital capabilities.
In the field of energy, utilities and resources, the energy transition will remain a priority for investors and management teams, directing large volumes of capital to M&A and other capital project development actions.
Moreover, in the consumer market, the report noted that “while challenges remain on the consumer front in 2023, portfolio reviews and a focus on transformational transactions will create M&A opportunities”.
Finally, the report also touched on the healthcare industry, where it identified the need to innovate and transform businesses in order to achieve growth goals.
This, the report explained, will drive M&A activity in 2023, with biotech, MedTech, consumer-facing healthcare, as well as digital health solutions, all being expected to attract strong investor interest.