The Big Picture: 2023 M&A Outlook

A look ahead to the key strategic trends expected to impact the overall M&A environment and some key sectors, presented by S&P Global.

“The volatile equity markets, rising interest rates and economic uncertainty have weighed on M&A activity. The lower equity valuations have reduced buyers’ purchasing power, and the higher cost of financing has increased the cost of making acquisitions. Escalating inflation and geopolitical turmoil stemming from the war in Ukraine have weakened executive confidence, which is a key driver to M&A. The structural headwinds have pushed many buyers in the private equity industry to the sidelines and have greatly reduced the number of large transformational transactions that led to record-setting M&A in 2021.

Overall M&A activity plummeted in 2022, and a sharp turnaround is not on the near-term horizon.  

Central banks have been raising interest rates to combat inflation. The moves hurt M&A as they led to equity market volatility and increased cost of acquisition financing. Companies have been able to absorb the increased costs on their debt because corporations were flush with cash coming out of the pandemic thanks to government stimulus efforts. However, many have been burning through reserves, and the higher cost of financing will eventually force more sellers into the market.”