The value of global M&A activity has dwindled in the first quarter of the year, as inflationary headwinds shake down valuations – and have blown other deals off the table.
Mergers and acquisitions (M&A) have “clearly weakened” in the first few months of 2022, according to analytics firm GlobalData, with total transaction value slipping more than 20 per cent $725bn (£576.7bn) in comparison with the final quarter of last year.
While the market is levelling out to more ‘normal’ levels after booming value growth last year, spiralling inflation across the globe has helped spur the “dismal” start to the year for dealmaking.
The boost that the dissipation of Covid-19 brought to markets has also begun to retreat, GlobalData analyst Snigdha Parida said, with the aftereffects piling onto rising economic pressures.
However, with some players now “flush with Covid-19 driven cash”, some larger acquisitions could be on the horizon, analysts told City A.M. at the start of the year.
“The overall fall in M&A activity came, despite a number of large deals of more than $10bn (£7.9bn) – mostly from the TMT sector,” Parida continued, citing the $68.7bn (£54.6bn) Activision Blizzard takeover by Microsoft.
“Tech giants will start engaging in billion-dollar M&As to position themselves in the metaverse – a mega-theme that will revolutionise digital media.”
However, Parida noted that Russia’s invasion of Ukraine and geopolitical tensions have added to corporates being “more cautious around deals”, leaving the M&A market entering a “more subdued phase”.
“Looking at the current mix of macro-economic conditions, geopolitical uncertainty, supply chain disruptions and other factors, deal making in the coming quarters of 2022 will continue to face significant challenges,” she said.