M&A resilience predicted in 2023: Lex Mundi report

Report suggests dealmakers are willing to take risks despite rising interest rates and inflation

M&A resilience predicted in 2023: Lex Mundi report

A majority of M&A practitioners worldwide remain optimistic about the prospects for mergers and acquisitions in 2023, according to a new report from Lex Mundi – a global network of independent law firms. Despite concerns about the global economic situation, many experts believe that the number of deals across public and private transactions will either remain steady or increase.

The economic environment is identified, across most regions as the pressing concern for private company M&A practitioners (24%). This rates above other concerns such as ESG pressures (3%) and political environment (9%) and valuation expectation gaps (13%).

For public M&A practitioners, the picture is largely the same – the most pressing concern was economic environment (22%) and the same weight was given to valuation expectation gaps as a commercial concern as that seen for private company M&A (13%).

For deal volume predictions for 2023, the picture for private and public M&A is also mirrored – 49% and 53% respectively expect deal volume in 2023 to be the same as it was in 2022. Despite the positive outlook, there are a number of member law firms which are expecting some drop-off in activity.

"Given the turbulence caused by rising interest rates and inflation in the global economy, it is not surprising that a majority of practitioners identify these factors as key influencers of the transactional landscape for 2023,” said Jenny Karlsson, Lex Mundi’s head of North America within the global markets team. “However, our report reveals that many practitioners are largely optimistic and anticipate at least as many deals in the year ahead, if not more.

“This positive outlook bucks the conventional wisdom that financial turmoil leads to a decline in transactions. Overall, our report suggests that, despite the current challenging environment, many dealmakers remain willing to take risks and invests,” she adds.

The report - Global M&A Trends 2023 – identifies  key concerns, deal activity by sector and deal volume predictions with selected regional insight for Asia and the Pacific, Europe, Latin America and the Caribbean, the Middle East and Africa, and North America.

With regard to regulatory concerns, in Asia and the Pacific, national security/foreign investment screening was identified as a far greater concern than antitrust matters (17% and 3% respectively). Across the other four regions, there was less disparity – 13% for national security/foreign investment screening and 6% for antitrust in Europe, and 11% for both factors in North America.

In Asia and the Pacific, half of practitioners predicted a greater number of private M&A deals in 2023 compared to 2022 (50%), while 60% expect deal volume for public M&A to remain at least the same.

In Europe, across both private and public M&A deals there is the expectation that to a large extent deal volume will be reflected in 2023 (64% and 61% predicting so respectively).

In Latin America and the Caribbean, a greater number of practitioners predict that private M&A will increase in deal volume in 2023 in comparison to public M&A (36% and 21% respectively).

In the Middle East and Africa, for both private and public M&A 40% of practitioners expect deal volume in 2023 to reflect the activity in 2022. In North America, 33% of practitioners expect public M&A deal volume to increase this year, more than the prediction for private M&A (11%).

Lex Mundi gathered intelligence from member law firms across 71 jurisdictions.

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