JPMorgan Exec Sees ‘More Challenging’ M&A Environment in 2023

For the first time since 2017, J.P. Morgan Chase was the top adviser for Canadian mergers and acquisitions (M&As) last year.

That’s according to data compiled by Bloomberg, which shows the megabank advised on 31 M&A deals — worth a total of $73.6 billion — involving Canadian companies last year. In 2021, J.P. Morgan handled $68.1 billion in M&As.

However, the total value of all Canadian acquisitions announced in 2022 was $331.7 billion, the report said, down 25% from a record $440 billion the prior year.

David Rawlings, CEO for Canada at J.P. Morgan, told Bloomberg the total volume of Canadian deals this year could be slower than in 2022.

“The forces of pension-fund and financial-sponsor growth may be offset by a more challenging financing environment,” Rawlings said, per the report. “Even if financing markets improve, interest rates are considerably more expensive than in 2020 and 2021.”

That projection follows a six-month stretch that saw a record drop in worldwide M&A activity.

The value of global M&A deal-making dropped from $2.2 trillion in the first half of 2022 to $1.4 trillion in the second half, the largest change in more than 40 years.

The overall volume of M&A activity was down, as well. The number of deals completed worldwide in 2022 was 36% lower than in 2021 — the biggest recorded drop in more than 20 years, although it remained higher than it was in 2016 and 2017.

The large drop was attributed to global markets’ shrinking confidence and higher cost of financing. M&As hit a record high in 2021 due to stimulus measures and interest rate cuts implemented in response to the pandemic.

Also contributing to the decline were increased regulatory scrutiny, slower deployments by private equity groups, and reduced ability of banks to finance new deals.

However, Latin America may see more M&A activity this year, with bankers anticipating it to grow by as much as 20%.

The projected growth is attributed to investors looking at the region after shifting away from activity in Russia — due to the war in Ukraine — and China because of worries about COVID, tensions with the United States, and a lack of transparency among Chinese companies.