A dealmaking drought is set to continue this year as firms batten down the hatches for a prolonged period of rampant inflation and stock market turbulence, analysts have warned.
The value of announced deals globally slumped nearly 25.5 per cent year-on-year to $1tn in the second quarter of 2022, according to data from Dealogic, as Russia’s invasion of Ukraine and fears of a looming recession gave dealmakers the jitters and sparked a major slowdown in transactions.
Analysts said dealmakers had shunned M&A so far this year as would continue to do so as they prepared for a looming recession.
“Companies are standing back from M&A in the short term as they are more focused on the impact of a recession on their business,” Alison Harding-Jones, Citigroup’s EMEA head of M&A, told Reuters.
“The timing for dealmaking will come but I don’t think it’s quite there yet.”
M&A activity in the United States plunged 40 per cent to $456bn in the second quarter, while Asia Pacific was down 10 per cent, Dealogic data showed.
Europe was the only region in which dealmaking held up more firmly however, rising six per cent on the same period last year amid a blizzard of private equity deals, including a 58bn euro take private bid by the Benetton family and U.S. buyout fund Blackstone for Italian infrastructure group Atlantia.
Mark Shafir, Citigroup’s global co-head of M&A warned the firm was “nervous” about deal volume in the second half of the year but said “transactions are still happening”.
The figures come after M&A activity in the UK was found to have plunged 25 per cent in the second quarter to a three year low.
Deals with any UK involvement have totalled $198.3bn so far during 2022, 25 per cent less than the value recorded during the first six months of 2021 and the lowest first half total since 2019, according to Refinitiv Deals Intelligence.
Private equity deals in the UK have similarly buoyed deal numbers, with firms announcing $45.7bn worth of deals targeting UK companies so far during 2022, according data from .
PE-backed M&A transactions account for 38 per cent of UK-target M&A so far during 2022, compared to 28 per cent during 2021 – higher than any annual share since Refinitiv’s records began in 1980.