Smaller Deals Will Characterize 2023 M&A

Buyers will focus on smaller deals as inflation triggers a focus on affordable goods, says Jana Mercereau, Head of Corporate M&A Consulting in Great Britain, at WTW. Deal volume has slowed significantly in Q4 2022 compared to the record pace of 2021. Geopolitical turmoil, inflation, rising interest rates and fears of a global recession will continue into next year, making it harder for buyers, especially those looking to invest outside their home country, to predict the profitability of potential targets. The difficult environment will drive an increase in companies jettisoning non-core assets in the pursuit of long-term value creation. Energy firms will continue to divest carbon intensive assets, and the economy will force other companies to sell assets as well. According to Mercereau: “As we move into 2023, economic uncertainty will continue to define and challenge M&A activity, but there will also be opportunities. The same volatility will present its own impetus for dealmaking, as strategic buyers seek to capitalize on cut-price deals in order to combat current market challenges and realise transformational growth.”