Surveying the lay of the Mergers and Acquisitions (M&A) landscape of 2023, let’s start by acknowledging that despite its uncertainty, 2022 was in some ways a year of normalization, with the market undergoing a correction that brought deal flow back in line with pre-pandemic levels.
2021 was an unusual time, driven in part by pent-up demand from the backlog caused by COVID-19 lockdowns, that year saw historic highs in transaction numbers with both record-breaking levels of execution and total value.
The headwinds of 2022, geopolitical unrest, looming recession and rising interest rates while substantial, could have presented more of a challenge to deal activity. The fact that deals originated and closed at the rate that they did indicated the carrying across of buoyant deal team sentiment from the previous year and therefore, provides hope for renewed resilience later in 2023.
Record breaking demand for Warranty and Indemnity (W&I) insurance in 2021 resulted in both new entrants to global markets and to existing insurers adding depth to their underwriting teams and strength to their capacity bases.
In 2022, suppressed deal volumes -predominantly in the second half of the year - combined with the increase in insurer resourcing and capacity to soften the market, marked a clear reverse trend coming off of the Q4 2021 hard market peak. The broadening of insurer appetite along with increasingly competitive pricing makes it an ideal time for dynamic deal teams to take advantage of risk management market conditions.
2023 has begun with some investors adopting a “wait and see” approach – particularly those looking at large transactions (GBP750m+) – and instead assessing the strength of their existing portfolios before embarking on new acquisitions.
A similar situation exists for sellers, some of whom sit back in anticipation, awaiting the return to more favourable market conditions. Notwithstanding this, we have seen steady activity for small to mid-size M&A transactions (GBP10m –GBP500m) throughout Q1 2023.
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