{"id":60439,"date":"2019-09-08T12:59:41","date_gmt":"2019-09-08T12:59:41","guid":{"rendered":"https:\/\/bakertillysee.com\/project\/nullam-semper-felis-quis\/"},"modified":"2019-09-08T12:59:41","modified_gmt":"2019-09-08T12:59:41","slug":"nullam-semper-felis-quis","status":"publish","type":"dt_portfolio","link":"https:\/\/bakertillysee.com\/bg\/projectbg\/nullam-semper-felis-quis\/","title":{"rendered":"Global Dealmakers: M&A Outlook 2023"},"content":{"rendered":"

[vc_row][vc_column][vc_column_text]Global M&A activity is poised to bounce back after 12 months of dealmaking doldrums, with experts from Baker Tilly expecting the mid-market to drive the recovery.<\/p>\n

The series of global shocks over the past year may seem unrelenting but the economic headwinds haven\u2019t dampened dealmakers\u2019 spirits.<\/p>\n

The latest review of Global M&A Activity by Baker Tilly International, produced in conjunction with Mergermarket, features a grim set of figures as mega-deals all but vanished in the midst of war, stubbornly high inflation, rapidly rising interest rates, fears of a recession and a slow-down in the technology sector.<\/p>\n

However, dealmakers seem ready to shrug off the doldrums of 2022 and push ahead despite the challenges.<\/p>\n

The report shows global M&A value dropped by close to a third from $US5.82 trillion in 2021 to $US3.96 trillion in 2022, with market sentiment particularly hard hit by the Ukraine conflict and macroeconomic factors.<\/p>\n

Cross-border and domestic deal values experienced a similar slump, recording year-on-year declines of 36% and 29%, respectively.<\/p>\n

The performance was in stark contrast to 2021, where abundant liquidity and historically low interest rates pushed M&A to record highs.<\/p>\n

Despite many of the macro challenges lingering into 2023, dealmakers are remarkably upbeat about the prospects of a strong year.<\/p>\n

Mergermarket surveyed more than 150 dealmakers across North America, Asia Pacific and Europe to gain insights into their investment intentions and perceptions regarding the M&A trends.<\/p>\n

Some 52% expect deal activity to increase over the next 12 months, according to Mergermarket\u2019s comprehensive survey of the sector, while a further third (31%) say they expect transaction activity to remain stable.<\/p>\n

Mid-market hitting the sweet spot<\/strong><\/p>\n

More than three quarters (78%) of those surveyed expect the recovery to be led by the mid-market \u2014 deals worth between $US15 million and $US50 million.<\/p>\n

In 2022, mid-market transactions accounted for 32% of all market activity, with the sector bucking the overall run of declines.<\/p>\n

In contrast to M&A overall, mid-market M&A saw deal numbers climb by 9%, while value dropped just 7%, compared to a 31% drop across the board.<\/p>\n

That has tempered the concerns of dealmakers with more than half (55%) describing their most recent mid-market deal as meeting or exceeding expectations.<\/p>\n

Dealmakers expect that trend to continue in the volatile economic environment of 2023, with investors cautious to sign up for the big debt packages needed to fund blockbuster transactions.<\/p>\n

Baker Tilly Malaysia Director of Corporate Finance Ding Su Lynn says big value deals had been stymied by delays in due diligence, with dealmakers pivoting towards the mid-market to hedge against the risk of large deal negotiations breaking down.<\/p>\n

Those pursuing mid-market deals were also better able to finance transactions entirely with equity or with support from private debt providers.<\/p>\n

\u201cWe have been seeing a lot of smaller acquisitions which has underpinned the strength of mid-market M&A,\u201d Ding Su Lynn says.<\/p>\n

\u201cPrivate equity firms have been active buying out smaller companies, and there have been a lot of mergers going on.<\/p>\n

\u201cAt the same time, other types of transactions have slowed and we have seen more caution on the part of buyers.\u201d<\/p>\n

Baker Tilly Global Head of Corporate Finance Harsh Maheshwari says the mid-market has been remarkably resilient, with a strong performance in cross-border deals.<\/p>\n

\u201cIt is tempting to see the decline of mega-deals as a broader symptom of a challenging market, but global mid-market M&A had a record year for volumes in 2022, and only saw a minor decline in value,\u201d Mr Maheshwari says.<\/p>\n

\u201cWe can see that mid-market M&A continues to be a sweet spot for dealmakers, while dealmakers are highly attuned to looking beyond their domestic borders for opportunity.\u201d<\/p>\n

Tech the strongest sector<\/strong><\/p>\n

Digital transformations are expected to be the top driver of mid-market M&A over the next 12 months, with 61% of respondents saying Telecommunications, Media and Technology to be the most attractive sector, followed by industrials and chemicals.<\/p>\n

Succession planning is also likely to factor into the rise in mid-market deals, while 20% say rising distress and insolvencies will drive M&A.<\/p>\n

\u201cAcquisitions in technology are now a recognised path to support digital transformation and obtain competitive advantage, which can be seen in the ongoing interest in TMT,\u201d Baker Tilly Spain Chief Executive Xavier Mercad\u00e9 says.<\/p>\n

\u201cWhile the poor performance of a lot of technological giants this year might weigh against some of the mega-deals in this sector, the mid-market understands it needs to leverage technology to broaden business models, improve efficiencies and offer consumers a point of difference.<\/p>\n

\u201cEven though three-quarters of dealmakers anticipate layoffs to continue for at least another year in the sector, only 5% expect a growing number of distressed TMT opportunities.<\/p>\n

\u201cA challenge for many businesses remains their legacy technology and M&A remains one of the fastest options to restructure and reposition, provided the right target fit can be found.<\/p>\n

\u201cMore broadly, VC funding for technology may be drying up and some investors are downgrading their investments in the sector.<\/p>\n

\u201cThis might be difficult news for TMT companies, but better news for those looking for market consolidation and bolt-on technology buys.\u201d<\/p>\n

Uncertain outlook in traditional industries<\/strong><\/p>\n

In contrast to a buoyant TMT, traditional M&A hotspots such as real estate, mining, and energy continue to have an uncertain outlook, driven very much by the state of the asset and its context.<\/p>\n

Just 17% of Dealmakers surveyed said they expected the most opportunities for M&A to emerge in energy, mining and utilities, with 41% saying they expected an increase in distressed M&A in the sector.<\/p>\n

Dealmakers were similarly downbeat about real estate, with 53% predicting an increase in distressed M&A and only 15% saying they expected more transactional opportunities in property in 2023.<\/p>\n

\u201cSome commercial real estate investments have clearly been left stranded by the changing nature of work, transport and operations during the COVID-19 years, and there\u2019s an ongoing need in Europe particularly to divest older-style buildings that have high energy requirements,\u201d Baker Tilly Belgium Corporate Finance Partner Olivier Willems says.<\/p>\n

\u201cReal estate is expected to bear the brunt of an increase in distressed sales, with construction not far behind.<\/p>\n

\u201cEnergy and resources sector companies face ESG headwinds, however, the opportunity remains strong for those that have been reducing their emissions and improving sustainability performance.<\/p>\n

\u201cWhen it comes to ESG, dealmakers seem to have stiffened their spines and are accepting the role of ESG in deals.\u201d<\/p>\n

Nearly half (45%) of those surveyed say ESG considerations factor into every deal, while 32% say it factors into most deals and just 11% say it isn\u2019t an issue.<\/p>\n

\u201cESG no longer ranks on top of the list of risks to dealmaking,\u201d Mr Maheshwari says.<\/p>\n

\u201cThis suggests sophisticated PE and M&A teams have learned to anticipate regulation risk, have become better at ESG due diligence and are confident they can manage this area of exposure.\u201d<\/p>\n

But while ESG is no longer seen as a significant risk, dealmakers say the due diligence process remains challenging due to new reporting requirements.<\/p>\n

More than half (53%) of those surveyed said they had to turn down an investment due to ESG concerns in the last 12 months.<\/p>\n

A lack of clarity around standards and benchmarks is a recurring theme, particularly for those looking at cross-border deals.<\/p>\n

One in five respondents said confusion on ESG standards was the biggest challenge when looking at deals, with 21% saying measuring future risk was their top concern.<\/p>\n

APAC coming into focus<\/strong><\/p>\n

Dealmakers were most optimistic around their prospects in the Asia-Pacific region, with 74% saying they expect an increase in M&A activity, and 31% saying they expect a \u201csignificant wave\u201d of M&A.<\/p>\n

The outlook for APAC dealmaking has been boosted by China\u2019s emergence from lengthy COVID lockdowns, lifting domestic demand and driving growth.<\/p>\n

A quarter of dealmakers, however, say India is their top market, followed by Australia (19%) and Singapore (15%).<\/p>\n

But Baker Tilly Singapore Executive Director Adrian Cheow says while Singapore was ranked in the top three most attractive markets, it may not necessarily be the most active investment destination.<\/p>\n

\u201cThere is a lot of wealth there and a lot of family investment offices are based there, but a lot of deals don\u2019t really happen in Singapore,\u201d Adrian Cheow says.<\/p>\n

\u201cThe money is parked there, but investors and family offices are really shopping around the region.<\/p>\n

\u201cThe funds may come from Singapore, but the investment will probably be in New Zealand, Australia, Vietnam or Thailand.\u201d<\/p>\n

Respondents are also bullish around their prospects in Australia, with high levels of comfort provided by its sophisticated M&A ecosystem and its strong mining and energy sector.<\/p>\n

Baker Tilly Staples Rodway Associate Director Nick Li says there is growing interest in mid-market transactions from private equity firms based in China, Singapore and Japan looking for geographic diversity.<\/p>\n

\u201cThere is still a lot of dry powder out there. Private equity has raised a lot of money and giving it back is not an option,\u201d Mr Li says.<\/p>\n

\u201cWe are seeing high net worth individuals and family offices undertaking a lot of investment consideration in New Zealand, not purely as a destination for immigration purposes, but also as a potential diversification strategy.<\/p>\n

\u201cThe housing market in Singapore is getting a little overcooked because of all of the incoming activity from Hong Kong and mainland China, so we are getting a little bit of a spill over effect.\u201d<\/p>\n

But Mr Li says recent changes in immigration rules for migrant investors to become long-term residents in New Zealand could emerge as a handbrake on transactions.<\/p>\n

\u201cThe new rules are that they have to invest in something that is actively contributing to the New Zealand economy, which means the project itself will need to be approved by a government agency,\u201d Mr Li says.<\/p>\n

\u201cWe are starting to see a regular flow of people looking for targets that they can consider, but the government department involved is under-resourced, so there is three times the wait time because the projects need to be approved.<\/p>\n

\u201cThere is a lot of complexity involved.\u201d<\/p>\n

Baker Tilly Singapore\u2019s Mr Cheow says the strength of the recovery across the APAC is good news, even as deals take longer to consummate in the face of multiple economic challenges facing both buyers and sellers.<\/p>\n

Although only 27% of respondents say due diligence delays is their biggest challenge, 52% say evaluations are more difficult to complete today than they were 12 months ago.<\/p>\n

Mr Cheow says volatile stock markets and inconsistent company earnings have made it difficult to model valuations against future earnings, as 49% of respondents say they have had to add resources to bolster due diligence efforts.<\/p>\n

Fewer than half (49%) of dealmakers surveyed said they consulted advisors in the past year, but 74% say they will use advisors in the future.<\/p>\n

\u201cUncertainty in relation to the difficult economic environment is top of mind for nearly half of dealmakers, and even if interest rates and funding constraints ease, that uncertainty won\u2019t vanish overnight,\u201d Mr Cheow says.<\/p>\n

Developed markets to dominate<\/strong><\/p>\n

While the emerging APAC region is expected to surge, dealmakers say developed markets such as Europe and North America will remain their investment focus.<\/p>\n

More than half (55%) say they\u2019ll be seeking opportunities in the USA, while 45% say the UK will be their preferred investment destination.<\/p>\n

Germany (41%) and France (31%) also remain top of mind for dealmaking potential.<\/p>\n

Baker Tilly Capital Managing Director Bill Chapman says established markets where there are mature deal targets in sectors such as advanced healthcare and technology offer stability in the face of global uncertainty.<\/p>\n

\u201cDealmakers can take comfort from markets they know \u2013 jumbo tech deals in the US such as Microsoft\u2019s $US68.7 billion bid for gaming developer Activision Blizzard and Oracle\u2019s $US28.3 billion acquisition of health tech company Cerner were timely boosts of confidence in a challenging year for M&A,\u201d Mr Chapman says.<\/p>\n

\u201cIn Europe, private equity players and corporate buyers still see value, with many looking at the UK for opportunities to take advantage of a weak sterling.<\/p>\n

\u201cThe biggest challenge for private equity, however, will be finance, with fundraising to remain a challenge as portfolio values decline and investors take pause before committing to new funds.\u201d<\/p>\n

\"\"<\/p>\n

Tech the strongest sector<\/strong><\/p>\n

Digital transformations are expected to be the top driver of mid-market M&A over the next 12 months, with 61% of respondents saying Telecommunications, Media and Technology to be the most attractive sector, followed by industrials and chemicals.<\/p>\n

Succession planning is also likely to factor into the rise in mid-market deals, while 20% say rising distress and insolvencies will drive M&A.<\/p>\n

\u201cAcquisitions in technology are now a recognised path to support digital transformation and obtain competitive advantage, which can be seen in the ongoing interest in TMT,\u201d Baker Tilly Spain Chief Executive Xavier Mercad\u00e9 says.<\/p>\n

\u201cWhile the poor performance of a lot of technological giants this year might weigh against some of the mega-deals in this sector, the mid-market understands it needs to leverage technology to broaden business models, improve efficiencies and offer consumers a point of difference.<\/p>\n

\u201cEven though three-quarters of dealmakers anticipate layoffs to continue for at least another year in the sector, only 5% expect a growing number of distressed TMT opportunities.<\/p>\n

\u201cA challenge for many businesses remains their legacy technology and M&A remains one of the fastest options to restructure and reposition, provided the right target fit can be found.<\/p>\n

\u201cMore broadly, VC funding for technology may be drying up and some investors are downgrading their investments in the sector.<\/p>\n

\u201cThis might be difficult news for TMT companies, but better news for those looking for market consolidation and bolt-on technology buys.\u201d<\/p>\n

Uncertain outlook in traditional industries<\/strong><\/p>\n

In contrast to a buoyant TMT, traditional M&A hotspots such as real estate, mining, and energy continue to have an uncertain outlook, driven very much by the state of the asset and its context.<\/p>\n

Just 17% of Dealmakers surveyed said they expected the most opportunities for M&A to emerge in energy, mining and utilities, with 41% saying they expected an increase in distressed M&A in the sector.<\/p>\n

Dealmakers were similarly downbeat about real estate, with 53% predicting an increase in distressed M&A and only 15% saying they expected more transactional opportunities in property in 2023.<\/p>\n

\u201cSome commercial real estate investments have clearly been left stranded by the changing nature of work, transport and operations during the COVID-19 years, and there\u2019s an ongoing need in Europe particularly to divest older-style buildings that have high energy requirements,\u201d Baker Tilly Belgium Corporate Finance Partner Olivier Willems says.<\/p>\n

\u201cReal estate is expected to bear the brunt of an increase in distressed sales, with construction not far behind.<\/p>\n

\u201cEnergy and resources sector companies face ESG headwinds, however, the opportunity remains strong for those that have been reducing their emissions and improving sustainability performance.<\/p>\n

\u201cWhen it comes to ESG, dealmakers seem to have stiffened their spines and are accepting the role of ESG in deals.\u201d<\/p>\n

Nearly half (45%) of those surveyed say ESG considerations factor into every deal, while 32% say it factors into most deals and just 11% say it isn\u2019t an issue.<\/p>\n

\u201cESG no longer ranks on top of the list of risks to dealmaking,\u201d Mr Maheshwari says.<\/p>\n

\u201cThis suggests sophisticated PE and M&A teams have learned to anticipate regulation risk, have become better at ESG due diligence and are confident they can manage this area of exposure.\u201d<\/p>\n

But while ESG is no longer seen as a significant risk, dealmakers say the due diligence process remains challenging due to new reporting requirements.<\/p>\n

More than half (53%) of those surveyed said they had to turn down an investment due to ESG concerns in the last 12 months.<\/p>\n

A lack of clarity around standards and benchmarks is a recurring theme, particularly for those looking at cross-border deals.<\/p>\n

One in five respondents said confusion on ESG standards was the biggest challenge when looking at deals, with 21% saying measuring future risk was their top concern.<\/p>\n

APAC coming into focus<\/strong><\/p>\n

Dealmakers were most optimistic around their prospects in the Asia-Pacific region, with 74% saying they expect an increase in M&A activity, and 31% saying they expect a \u201csignificant wave\u201d of M&A.<\/p>\n

The outlook for APAC dealmaking has been boosted by China\u2019s emergence from lengthy COVID lockdowns, lifting domestic demand and driving growth.<\/p>\n

A quarter of dealmakers, however, say India is their top market, followed by Australia (19%) and Singapore (15%).<\/p>\n

But Baker Tilly Singapore Executive Director Adrian Cheow says while Singapore was ranked in the top three most attractive markets, it may not necessarily be the most active investment destination.<\/p>\n

\u201cThere is a lot of wealth there and a lot of family investment offices are based there, but a lot of deals don\u2019t really happen in Singapore,\u201d Adrian Cheow says.<\/p>\n

\u201cThe money is parked there, but investors and family offices are really shopping around the region.<\/p>\n

\u201cThe funds may come from Singapore, but the investment will probably be in New Zealand, Australia, Vietnam or Thailand.\u201d<\/p>\n

Respondents are also bullish around their prospects in Australia, with high levels of comfort provided by its sophisticated M&A ecosystem and its strong mining and energy sector.<\/p>\n

Baker Tilly Staples Rodway Associate Director Nick Li says there is growing interest in mid-market transactions from private equity firms based in China, Singapore and Japan looking for geographic diversity.<\/p>\n

\u201cThere is still a lot of dry powder out there. Private equity has raised a lot of money and giving it back is not an option,\u201d Mr Li says.<\/p>\n

\u201cWe are seeing high net worth individuals and family offices undertaking a lot of investment consideration in New Zealand, not purely as a destination for immigration purposes, but also as a potential diversification strategy.<\/p>\n

\u201cThe housing market in Singapore is getting a little overcooked because of all of the incoming activity from Hong Kong and mainland China, so we are getting a little bit of a spill over effect.\u201d<\/p>\n

But Mr Li says recent changes in immigration rules for migrant investors to become long-term residents in New Zealand could emerge as a handbrake on transactions.<\/p>\n

\u201cThe new rules are that they have to invest in something that is actively contributing to the New Zealand economy, which means the project itself will need to be approved by a government agency,\u201d Mr Li says.<\/p>\n

\u201cWe are starting to see a regular flow of people looking for targets that they can consider, but the government department involved is under-resourced, so there is three times the wait time because the projects need to be approved.<\/p>\n

\u201cThere is a lot of complexity involved.\u201d<\/p>\n

Baker Tilly Singapore\u2019s Mr Cheow says the strength of the recovery across the APAC is good news, even as deals take longer to consummate in the face of multiple economic challenges facing both buyers and sellers.<\/p>\n

Although only 27% of respondents say due diligence delays is their biggest challenge, 52% say evaluations are more difficult to complete today than they were 12 months ago.<\/p>\n

Mr Cheow says volatile stock markets and inconsistent company earnings have made it difficult to model valuations against future earnings, as 49% of respondents say they have had to add resources to bolster due diligence efforts.<\/p>\n

Fewer than half (49%) of dealmakers surveyed said they consulted advisors in the past year, but 74% say they will use advisors in the future.<\/p>\n

\u201cUncertainty in relation to the difficult economic environment is top of mind for nearly half of dealmakers, and even if interest rates and funding constraints ease, that uncertainty won\u2019t vanish overnight,\u201d Mr Cheow says.<\/p>\n

Developed markets to dominate<\/strong><\/p>\n

While the emerging APAC region is expected to surge, dealmakers say developed markets such as Europe and North America will remain their investment focus.<\/p>\n

More than half (55%) say they\u2019ll be seeking opportunities in the USA, while 45% say the UK will be their preferred investment destination.<\/p>\n

Germany (41%) and France (31%) also remain top of mind for dealmaking potential.<\/p>\n

Baker Tilly Capital Managing Director Bill Chapman says established markets where there are mature deal targets in sectors such as advanced healthcare and technology offer stability in the face of global uncertainty.<\/p>\n

\u201cDealmakers can take comfort from markets they know \u2013 jumbo tech deals in the US such as Microsoft\u2019s $US68.7 billion bid for gaming developer Activision Blizzard and Oracle\u2019s $US28.3 billion acquisition of health tech company Cerner were timely boosts of confidence in a challenging year for M&A,\u201d Mr Chapman says.<\/p>\n

\u201cIn Europe, private equity players and corporate buyers still see value, with many looking at the UK for opportunities to take advantage of a weak sterling.<\/p>\n

\u201cThe biggest challenge for private equity, however, will be finance, with fundraising to remain a challenge as portfolio values decline and investors take pause before committing to new funds.\u201d[\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

Global M&A activity is poised to bounce back after 12 months of dealmaking doldrums, with experts from Baker Tilly expecting the mid-market to drive the recovery.<\/p>\n","protected":false},"author":1,"featured_media":59562,"template":"","meta":{"episode_type":"","audio_file":"","cover_image":"","cover_image_id":"","duration":"","filesize":"","date_recorded":"","explicit":"","block":"","filesize_raw":"","footnotes":""},"dt_portfolio_category":[577],"dt_portfolio_tags":[],"series":[],"class_list":["post-60439","dt_portfolio","type-dt_portfolio","status-publish","has-post-thumbnail","hentry","dt_portfolio_category-press-releases-bg","dt_portfolio_category-577","description-off"],"episode_featured_image":"https:\/\/bakertillysee.com\/wp-content\/uploads\/2019\/09\/MA-Global-Dealmakers-2023-GR.png","episode_player_image":"https:\/\/bakertillysee.com\/wp-content\/plugins\/seriously-simple-podcasting\/assets\/images\/no-album-art.png","download_link":"","player_link":"","audio_player":false,"episode_data":{"playerMode":"dark","subscribeUrls":{"apple_podcasts":{"key":"apple_podcasts","url":"","label":"Apple Podcasts","class":"apple_podcasts","icon":"apple-podcasts.png"},"stitcher":{"key":"stitcher","url":"","label":"Stitcher","class":"stitcher","icon":"stitcher.png"},"google_podcasts":{"key":"google_podcasts","url":"","label":"Google Podcasts","class":"google_podcasts","icon":"google-podcasts.png"},"spotify":{"key":"spotify","url":"","label":"Spotify","class":"spotify","icon":"spotify.png"}},"rssFeedUrl":"https:\/\/bakertillysee.com\/bg\/feed\/podcast\/real-people-real-stories-a-baker-tilly-podcast","embedCode":"

Global Dealmakers: M&A Outlook 2023<\/a><\/blockquote>