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Headwinds slow global M&A in Q2’22


Plummeting equity valuations, surging inflation, rising interest rates and ongoing geopolitical uncertainty weighed on dealmaking throughout the first half of the year.

The Take

Current market conditions are taking some major players out of the M&A market. Higher interest rates and lower valuations are turning private equity firms into bystanders. SPACs previously helped boost M&A and IPO activity, but momentum from that vehicle has slowed considerably as blank-check companies have faced increased scrutiny while operating in a difficult environment. Despite headwinds, the first half of 2022 saw the announcement of a number of large M&A deals. Corporate executives continue to discuss possible transactions, but absent a significant market swing, sellers need to adjust their expectations before the M&A market sees a meaningful pickup. However, the pipeline of prospective targets is swelling because IPO activity has also been subdued. With lower valuations and increased volatility, equity issuances declined across the globe.

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The first six months of 2022 saw the S&P 500 fall 20.6%, marking the index’s worst performance since 1970. During the same period, volatility stayed elevated, with the Chicago Board Options Exchange S&P 500 volatility index, or the CBOE’s VIX, recording an average close of 26.4, up from an average close of 20.6 during the first half of 2021. In the second quarter, volatility ticked up, with the VIX recording an average close of 27.4. The instability has partly stemmed from the Russia-Ukraine war, which helped commodity prices climb higher and added to the historic inflation that is causing global economic uncertainty.

Central banks have worked to tame inflation by raising interest rates, and the higher cost of financing has pushed some potential dealmakers to the sidelines.

Private equity firms typically use leverage to achieve their return goals, but financial sponsors have largely been absent from the M&A picture with interest rates climbing quickly. In recent quarters, private equity firms and special purpose acquisition companies have been active players in M&A.

SPACs announced M&A transactions at a slower place during the second quarter, and the number of initial public offerings from those vehicles fell to levels not seen since before the COVID-19 pandemic. Traditional IPOs have also slowed in 2022. In the U.S., the second quarter was the first in more than five years without a $1 billion-plus IPO.

Despite headwinds, silver linings did appear in the M&A market. Activity in developed Europe accelerated in the second quarter. Globally, the number of $10 billion-plus transaction announcements picked up in the first half of 2022 compared with the first and second halves of 2021. Also, the number of $10 billion-plus deals completed in the first half of 2022 was in line with the full-year pace of 2021.

But M&A deals of other sizes fell dramatically.

About the M&A and Equity Offerings Market Report

This report provides an overview of global M&A and equity issuance trends, offering insights into the sectors and geographies that are seeing the most activity. The report focuses on those deals with the highest valuations because they can influence the entire market. The strategies pursued by larger players can also underscore trends occurring throughout an industry. The report has always focused on M&A announcements and completed equity issuance transactions. However, we have updated our format to highlight deals that are attracting greater interest from strategic decision-makers. This edition touches on completed M&A transactions and provides a more granular breakdown of M&A announcements by size. In recent editions, we have added data on developed Europe M&A activity and information on SPACs. This report will continue to evolve along with the dealmaking landscape.

Key findings

  • The total value of M&A announcements dropped 26.2% year over year to $1.710 trillion in the first half of 2022; the number of deals fell 14.7% to 24,775 in the same period.
  • M&A in developed Europe jumped in the second quarter, with the total value of announcements more than doubling from the previous quarter to $251.03 billion, even though the Russia-Ukraine war played a role in depressing dealmaking.

Global equity issuance plummeted in the first half of 2022, with total value of the deals falling 67.3% to $193.74 billion. 3 M&A and Equity Offerings Market Report Q2’22

Q2'22 M&A and Equity Offerings Market Report