M&A Resilience Set to Shine Through in 2023, Despite Economic Uncertainty – According to 2023 Global Trends Report from Lex Mundi

Identifying upcoming M&A trends in the latest Global M&A Trends Report

16th February 2023
News 2023 Mna Trends Report Header

Lex Mundi, the world’s leading global network of independent law firms, has gathered intelligence from member law firms across 71 jurisdictions to analyse recent and identify upcoming trends for its latest Global M&A Trends Report.

A majority of M&A practitioners worldwide remain optimistic about the prospects for mergers and acquisitions in 2023. Despite concerns about the global economic situation, most experts believe that the number of deals across public and private transactions will either remain steady or increase. The report, which highlights the key global trends for M&A, was released today by Lex Mundi.

The economic environment is identified, across all regions, as the pressing general concern for private company M&A practitioners (24%) - not least caused by the tremors of global headwinds of inflation, interest rate rises and geopolitical tensions destabilising markets – rating above other concerns such as ESG pressures (3%) and political environment (9%) and valuation expectation gaps (13%). For public M&A practitioners, the picture is largely the same – the most pressing general concern was economic environment (22%) and the same weight was given to valuation expectation gaps as a commercial concern (13%). For deal volume predictions for 2023 the picture for private and public M&A is also largely mirrored – 49% and 53% respectively expect deal volume in 2023 to be the same as it was in 2022.

Jenny Karlsson, Lex Mundi’s Head of North America within the Global Markets team, commented:
"Given the turbulence caused by rising interest rates and inflation in the global economy, it is not surprising that a majority of practitioners identify these factors as key influencers of the transactional landscape for 2023. However, our report reveals that practitioners are largely optimistic and anticipate at least as many deals in the year ahead, if not more.

This positive outlook bucks the conventional wisdom that financial turmoil leads to a decline in transactions. It suggests that, despite the current challenging environment, many dealmakers remain willing to take risks and invest.”

Global M&A Trends 2023 also identifies key concerns, deal volume predictions deal volume by sector, and selected regional insight for Asia and the Pacific, Europe, Latin America and the Caribbean, the Middle East and Africa, and North America.

Key Concerns: For all the five regions, economic environment was reported as the key concern: 33% in North America; 27% in Europe; 26% in the Middle East and Africa; 20% in Asia and the Pacific; and 18% in Latin America and the Caribbean. For commercial concerns, all regions placed more weight on valuation expectation gaps being a top concern in comparison to MAC/financial covenants. In relation to legal concerns, only in Europe did practitioners place due diligence as a more pressing concern over transactions structuring (11% and 10% respectively). For regulatory concerns, in Asia and the Pacific national security/foreign investment screening was identified as a far greater concern than antitrust matters (17% and 3% respectively). Across the other four regions, there was less disparity – 6% for antitrust and 13% for national security/foreign investment screening in Europe, and 11% for both factors in North America.

Deal Activity by Sector: For deal activity, in Asia and the Pacific technology, media and telecoms stood out as the sector with the most deal activity (40%) followed by energy (20%). Similarly, in Europe more than half of deal activity took place in the technology, media and telecoms industry (52%), followed by energy (19%). The greatest level of deal activity for Latin America and the Caribbean and the Middle East was carried out in the financial services industry (31% and 21% respectively). Energy saw the greatest levels of M&A activity in North America (36%), followed by manufacturing (27%). Unlike other regions, in North America, less than 10% of activity took place in the technology, media and telecoms industry (9%).

Deal Volume: In Asia and the Pacific, half of practitioners predicted a greater number of private M&A deals in 2023 compared to 2022 (50%), while 60% expect deal volume for public M&A to remain at least the same. In Europe, across both private and public M&A deals there is the expectation that to a large extent deal volume will be reflected in 2023 (64% and 61% predicting so respectively). In Latin America and the Caribbean, a greater number of practitioners predict that private M&A will increase in deal volume in 2023 in comparison to public M&A (36% and 21% respectively). In the Middle East and Africa, for both private and public M&A 40% of practitioners expect deal volume in 2023 to reflect the activity in 2022. In North America, 33% of practitioners expect public M&A deal volume to increase this year, more than the prediction for private M&A (11%).

For further insight into the trends and 2023 predictions from our member firms across each of those key regions, download the fourth annual edition of the Lex Mundi Global M&A Trends Report.

The Lex Mundi Global M&A Trends Report provides readers with a concise overview of the insights and predictions of M&A practitioners across 71 jurisdictions in the Lex Mundi network. Over 50 Lex Mundi member law firms contributed to the report, including Afridi & Angell, member law firm for the United Arab Emirates, Baker Botts LLP, member law firm for Texas, USA, Deacons, member law firm for Hong Kong, and S. Horowitz & Co., member law firm for Israel.