The year 2023 started with subdued M&A expectations due to rising interest rates and fears about the onset of a possible recession. Nevertheless, the number of transactions in the first six months has surpassed the pre-pandemic levels of 2019. Will the second half of the year see changes?

M&A market forecasts for the remainder of 2023

For the second half of the year, the market is showing signs that more interesting and transformative M&A opportunities will emerge. After a difficult start to the year, many things have changed in recent months: inflation and rising interest rates are slowing down, the US has weathered the debt ceiling crisis and artificial intelligence has emerged as the next big technological revolution.

Executives will continue to use M&A activity as a tool to reposition their businesses, drive growth and generate lasting results. For three reasons:

  • The fall in the value of listed companies will create investment opportunities.
  • Corporate restructuring will continue to pick up, which may lead to mergers and acquisitions of distressed companies. Retail, FMCG, real estate and industrials are the four sectors where most restructuring is expected.
  • More stable interest rates will reduce uncertainty and make it easier to price transactions.

The rise of the mid-market in the second half of the year

The M&A market for the remainder of the year will be dominated by mid-size deals, which are more feasible in the current regulatory and financing environment. Executives are favouring mid-size deals because they are less affected by market volatility and face less regulatory scrutiny. They can also be transformational and accelerate growth if they are part of a well-planned strategy.

The push for artificial intelligence

By sector, the most active sector in the first half of the year was technology, media and telecommunications, which accounted for 28% of deals. New technologies are key to the transformation of companies; and artificial intelligence will create opportunities in the M&A market for both corporate groups and private equity funds.

In terms of value, the energy, power and natural resources sector led the ranking from January to June, with 23% of the total. Companies are increasingly looking to reduce their impact on the environment and are committed to zero net emissions strategies. The energy transition is already a reality and is generating enormous changes that open up opportunities for M&A transactions.

Tips for undertaking an M&A transaction now

Macroeconomic conditions will lengthen the negotiation periods for transactions and will make it necessary to deepen due diligence processes. The business situations that will emerge in the M&A market will be more complex and challenging for all parties.

In order to close a transaction and avoid price reductions, sellers must assume that buyers and their financing sources will devote more time and effort to analysing and studying the transaction. However, a common mistake we see quite often is that sellers and their banks set very aggressive sales terms. This can cause the transaction to fail.

We end with a word of advice: companies with strong balance sheets and liquidity would do well to seize the moment to make acquisitions now that difficult financing is reducing competition. At Confianz we are specialists in M&A transactions and can advise you throughout the process.


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