Status: 12/30/2022 4:14 p.m
After a record 2021, the total number of transactions completed worldwide fell by 38 percent in 2022 compared to the previous year. This represents the sharpest annual decline since 2001.
In the second half of the year, the global transaction business recorded a record decline. Rising interest rates, economic uncertainty and the war in Ukraine slowed down the Mergers & Acquisitions (M&A) business, i.e. the purchase and merger with other companies.
Globally, the total volume of deals closed worldwide in 2022 fell 38 percent from 2021, the sharpest year-on-year decline since 2001. Still, volume remained at high levels by historical standards and exceeded global totals in 2016 and 2017.
The market was almost at a standstill from the summer
The slowdown follows a fast-paced 2021 in which transactions had skyrocketed. In the US and Europe, the transaction volume fell by 39 percent this year. In Asia-Pacific, they fell by 33 percent.
According to data provider Refinitiv, mergers and acquisitions worth $1.4 trillion were announced in the six months to December, the Financial Times reported. In the first half of 2022, $2.2 trillion in transactions were still being completed. This is the largest six-month drop since records began in 1980.
The number of mega deals worth more than $10 billion fell sharply during the year: 25 were signed in the first half of the year, but only 11 in the second. Mark Sorrell, co-head of global M&A at Goldman Sachs, called 2022 “a tale of two halves” as the lack of cheap financing stalled the M&A market after the summer.
Bad times for investment bankers
In some cases, investment firms have purchased debt to pay for their own transactions. Banks that had agreed to finance dozens of mega-buyouts by private equity firms when conditions were more favorable had fewer opportunities to support new deals because they now lacked cash.
The most famous near-failed deal was Elon Musk’s $44 billion takeover of Twitter. The banks were forced to wait to participate in the $12.7 billion in debt financing of the deal. Billionaire Musk didn’t have enough equity and had to raise the money from equity and loans to pay the bulk of the transaction’s costs.
The sale of sports clubs is an area where trade remains brisk. The record $4 billion deal for basketball teams Phoenix Suns and Mercury in December was the latest in a string of record sales by professional sports teams this year. These include the football clubs Chelsea FC and AC Milan.