Mergers and acquisitions (M&A) activity globally fell well short of the high-water mark set last year as debt financing markets collapsed and stock market volatility decimated valuations, and dealmakers are predicting a slow path to recovery in 2023.
For both, the buyers were able to readily lean on banks for financing as investment grade-rated corporations had easier access to corporate debt to execute large tie-ups.
Lorenzo Corte, a London-based partner at Skadden, said dealmaking in the energy industry is expected to pick up due to the war in Ukraine as "Europe has to replace an enormous amount of energy that came from Russia with alternative sources."Several megadeals worth tens of billions of dollars fell apart in 2022 as market volatility and a tougher antitrust climate gave companies pause.
Banks, which backed several sponsor-led buyouts before the markets choked up, were faced with hefty losses on debt they failed to sell to investors. "Despite the challenges of raising acquisition financing, private equity funds remain confident as they are sitting on a lot of dry powder and the market is coming to them," said Alvaro Membrillera, head of the London office at Paul Weiss. "But before taking action they want to see the real impact of the recession."
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