Cross-border mergers and acquisitions (M&A) stayed at historically high levels in the first six months of 2022, despite rampant inflation, interest rate rises and a gloomy global economic outlook.
The value of cross-border deals agreed worldwide topped $692bn between January and June, down by 15% on the same period of 2021, according to Refinitiv figures. The number of cross-border deals stood at 8188 — a decline of 7% from the previous year, but still the second-highest level ever recorded. Cross-border M&As also outperformed the broader M&A market by number of deals.
Matt Toole, director of deals intelligence at London Stock Exchange Group (LSEG) tells fDi that “while we are seeing a shifting economic picture, companies are looking for growth and if consolidation can assist in that goal, while also improving costs and profits, M&A can be an answer”.
While cross-border M&A is “a pretty diverse bucket”, he says, affected by a range of factors — from geographic opportunities to changes in regulation to currency fluctuations — it is set to reap the benefits of a changing economic landscape.
“As the post-pandemic M&A environment begins to take shape, expanding geographically or bringing supply chains into more direct control may [well] drive cross-border deals,” Mr Toole says.
But, so far this year, not all markets are holding steady. The sharpest decline in the value of foreign M&A occurred in the Americas region, falling some 42% to $166bn — the lowest level since the first half of 2020. Meanwhile, the value of cross-border deals rose in Europe and Asia by 4% and 2% respectively.
Still, the participation of the US holds strong, with its outbound acquisitions accounting for 36% of total activity — on par with levels seen last year and well above the 20-year average of 21%.
The financial, industrial and consumer products sectors remained robust, according to Refinitiv data, with an increased number of deals compared with the first half of 2021. High technology also retained a strong volume of deals albeit falling slightly from 2021. Meanwhile, telecommunications and retail showed some of the biggest falls in the first half of 2022, compared with last year.
This period was also a record year for cross-border private equity M&A, at $233.4bn worth of deals recorded during the first half of the year. Private equity-backed buyouts accounted for a record 26% of M&A activity during the first half of 2022 with overall value reaching $552.bn, up 1% compared to a year ago.
“Private equity deal-making will be impacted by the shifting interest rate environment this year, so this area of the market will be one to watch during the second half of the year,” Mr Toole adds.