As Merger Interest Cools, M&A Insurance Gets Cheaper

The market for mergers and acquisitions insurance is cooler now than it was previously, The Wall Street Journal wrote Wednesday (April 13).

This comes after an overheated market during a busy acquisition season at the end of 2021.

According to experts, companies seeking insurance to help guard against the risks inherent in making a deal should expect lower prices and more insurance staff capacity to help them with various requests. Jodi Rosensaft, managing director in transactional risk practice at Marsh LLC, said they’re “not seeing that type of pressure, both on pricing and availability, that we were.”

WSJ wrote that deal activity in 2021 hit record levels for various reasons, like low interest rates and growth in private-equity fundraising.

The total global M&A activity last year was up 64% from the previous year, hitting around $5.9 trillion, Refinitiv reported.

That came as the hot period of activity exhausted the capacity of the insurance industry to deal with the various policies companies were seeking. WSJ writes that employees were overworked and unable to field all the demand.

Rosensaft said last year was something of an “aberration” to the M&A deal flow in every sector, deal category and size of transaction.

“There was a lot of pressure that was just making getting the deals done more difficult across the board. We’ve returned to regular levels.”

See also: Global M&As Crushed Under Weight of Inflation, Regulation, War

PYMNTS wrote that M&As around the globe have been falling due to a number of factors, like higher inflation, tightening regulations and the war in Ukraine.

Dealmaking has been down 23% compared to the previous year. The report notes that there were $1 trillion in deals signed in the first quarter this year. Microsoft’s $75 billion acquisition bid for Activision Blizzard was the biggest thus far, with the second-largest being the €21 billion (nearly $23 billion) buy of Mileaway by Prologis. Mileaway is Blackstone’s European warehouses.

But every continent has seen less M&A deals going on, per data from Refinitiv.

This follows a two-year period of record dealmaking that, in part, came from stimulus injected into economies following the pandemic.

Last year’s M&A deals were sitting at $5.63 trillion, which topped the record of $4.42 trillion from 2007.