Global M&A Volumes Drop by 48% in First Quarter

Global mergers and acquisitions (M&A) volumes dropped by 48% year over year in the first quarter.

As of Thursday (March 30), M&A volumes for the quarter were down by 70% in Europe, 44% in the United States and 29% in Asia Pacific, Reuters reported Friday (March 31).

With this decline, M&A activity slowed to its lowest level in more than 10 years, according to the report.

The report attributed the steep drop to rising interest rates, high inflation, geopolitical tensions, fears of a recession and the banking crisis.

The turmoil around Silicon Valley Bank in the U.S. and Credit Suisse in Switzerland led companies to halt many deals that had been in progress, as they were concerned about the widespread uncertainty as they were seeking financing, according to the report.

Larger deals — those worth over $10 billion — were also impacted by concerns about tougher antitrust enforcement, the report said.

At the same time, there are factors that could contribute to some M&A deals moving forward. These include the facts that well-capitalized buyers can still borrow the money they need, depressed valuations of companies can lead to larger companies aiming to take them over, and pent-up demand can be freed up when the current volatility settles down, per the report.

The first quarter of 2023 followed a calendar year that saw a significant drop in global M&A activity.

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

That year’s drop in M&A volume was attributed to global markets’ shrinking confidence and higher cost of financing. M&A activity had reached a record high the previous year, in 2021, due to stimulus measures and interest rate cuts put in place in response to the pandemic.

Among the major tractions that did go forward in the first quarter of 2023 was the CVS takeover of Oak Street Health, the Reuters report said.

The pharmacy giant announced in February that it would acquire the primary care provider for $10.6 million.