03 AUG 2023

Global M&A: 2H marks a shift towards recovery

After a muted start to dealmaking in Q1 (-45% YoY), M&A activity steadily improved in Q2 as the macro environment stabilized and the financing markets opened, fueling increased momentum across industries and a kick-start to sponsor activity.

Most notable was the rise of large-scale M&A, with 10 announced deals $10bn+ in Q2 , as well as a meaningful sector shift from growth to old economy following a prolonged, post-Covid growth cycle. Across the Americas, the natural resources sector in particular picked up steam (+50% YoY), accounting for the largest contribution to overall volumes at 30%. Healthcare, technology, media and telecom (TMT) and industrials contributed a combined 48%. 

Three key areas of focus for 2H:

Simplification & separation dominates

Corporate separations continue to grow at an outsized pace and remain a significant driver of M&A activity as management teams and boards continue to focus on strategic transformation, portfolio management and shareholder value. Corporate carve out offerings have also driven a meaningful portion of IPO activity, buoyed by transactions of historic scale. Beyond separation activity specifically, creative structuring has been an important lever to maximize value in the face of an evolving market and M&A backdrop. Thoughtfully addressing consideration mix, structured alternatives and sustainability has meaningfully driven deal value and volumes.

Take-privates take off

Consistent with overall activity, sponsor activity saw a softer-than-expected start to the year, with overall volumes down 60% YoY, although a 43% increase QoQ and a 75% uptick in deals over $500 million provided a much-needed boost to wrap the quarter.

The bright spot? Take-privates, which rose to their highest level ever as sponsors looked to actively deploy dry powder, with a willingness to use larger equity checks and pursue creative financing structures. Improved sentiment in the financing markets has aided this momentum as debt becomes more readily available (albeit more expensive) in both the syndicate and private markets.

Activism accelerates

Globally, activist campaign levels demonstrated meaningful acceleration in Q2, as large and mega cap companies increasingly account for a greater portion of activist targets – and in the Americas, occasional and first-time activists account for an increasingly larger portion of overall activity.

Driving the shifts? New funds are adopting traditional activist tactics and larger, more established funds are increasingly adopting private tactics, with new funds and occasional activists now accounting for 70% of YTD campaign volumes.

Source: Dealogic and Refinitiv as of June 30, 2023. Defined as Americas M&A when either the acquiror, divestor or target is in the Americas region.