The global mergers and acquisitions (M&A) market reached historic levels of activity in 2022 as companies accelerated operational and financial restructuring to better position themselves for the post-pandemic landscape. Despite economic uncertainty, global M&A deal volume rose 12% year over year to 37,308 announced transactions worth $1.6 trillion in the aggregate, the highest value ever recorded, according to Refinitiv data. This in-depth analysis and an update on board M&A market outlook for 2023 will help you understand the future of the market in coming years.
While M&A activity will not sustain such lofty growth rates into 2023, the broad M&A Market outlook remains quite positive. Private equity firms will continue funding large, strategic deals across industries, from technology and healthcare to industrials and fintech. Cross-border M&A is gaining more momentum as borders reopen and world leaders deepen economic ties. Certain sectors like technology, healthcare, and financial services that saw the most active dealmaking recently will keep attracting considerable interest from corporate acquirers and private equity groups alike.
Private equity firms had an unprecedented year in 2022, establishing themselves as the most active strategic acquirers in the market. PE buyouts totaled over $2 trillion across more than 900 deals worldwide, more than doubling the value recorded in 2020, according to data provider Preqin.
Several megadeals dominated headlines, including Clayton Dubilier & Rice‘s $7.4 billion acquisition of global packaging company Berry Global, Thomas H. Lee Partners’ $3.7 billion take-private of Pandora Media, and Carlyle Group’s $23 billion buyout of medical device maker Medtronic’s patient monitoring business. Large buyout funds have significant capital to deploy, creating strong demand for attractive assets and portfolio companies.
Private equity will maintain its position as the dominant force in M&A markets through 2023. While post-pandemic economic uncertainties may dampen dealmaking motivation slightly, most industry observers expect private equity firms will continue committing large sums of capital to new acquisitions, especially within growing sectors such as technology, healthcare, business services, and financial technology where ample opportunities remain.
The availability of cheap debt to finance leveraged buyouts further bolsters private equity’s dealmaking power. As interest rates increase gradually, high LBO volumes will stay feasible for the time being according to most predictions. Private equity will thus keep driving a sizable portion of overall M&A activity, from mega-deals to more mid-sized transactions, in the year ahead. Its influence on restructuring companies and industries for future success will remain profoundly substantial.
Cross-border mergers and acquisitions experienced a decline in 2022. In 2021 it touched over $1.2 trillion in value according to Refinitiv data. This surge was driven by economic recoveries in key regions, increasing international expansion ambitions, and favorable geopolitical conditions.
China dominated as the top source of outbound M&A, though European countries and Japan also significantly increased cross-border dealmaking. US companies remained prime targets for international acquirers seeking to expand market reach and technology/IP access.
Nvidia’s $40 billion acquisition of UK-based chip designer ARM from SoftBank Group stands out as one of the largest technology deals ever. Takeda Pharmaceutical’s $59 billion sale of its consumer healthcare business to Unilever exemplified the rise of health and wellness M&A across borders. Cross-border activity may not reach quite such landmark highs in 2023, but overall volume and value should continue rising at a steady pace.
The reopening of global economies, increasing world leader cooperation, and growing middle classes in developing markets are fueling cross-border deal ambitions for 2023 and beyond. Companies aim to leverage M&A for growth into new markets, diversification benefits, talent aggregation, and innovation capability gains outside domestic borders. While policy and geopolitical risks could create some volatility, the macroeconomic forces driving international expansion and investment remain largely positive.
The technology, healthcare, and financial services industries experienced the highest deal volumes and values in 2021 but it declined substantially in 2022. But, they are poised for further substantial activity in 2023. These sectors are undergoing rapid change, fostering significant M&A drivers around innovation, growth, and strategic repositioning.
Technology M&A topped dealmaking last year, including Intel’s $19.5 billion acquisition of Mobileye and Microsoft’s $16 billion purchase of Nuance Communications. Technology firms seek to gain capabilities around AI, software, cloud, and more through deals as they transform for the future. Many forecasts predict sustained strong tech M&A, from mega-deals to venture buyouts, in 2023.
Healthcare M&A also reached new highs, with Cigna’s $52 billion buy of MDLive and Cardinal Health’s $6.1 billion acquisition of Cordis Corporation among notable deals. Demographic changes, policy evolutions, and a push toward value-based care are fueling healthcare deal activity and will sustain momentum into 2023 according to industry experts.
Financial services M&A included Charles Schwab’s $4 billion buy of TD Ameritrade’s E*Trade and FIS’s $3.4 billion purchase of Worldpay, indicating consolidation amid fintech innovation and diversification. Regulations, technologies, and competitive pressures are driving strategic restructuring across financial subsectors, keeping M&A an active mechanism for change. The year ahead will likely bring more sizable deals and targeted buyouts.
While the M&A Market outlook for 2023 remains broadly positive, certain risks and uncertainties could curb enthusiasm if materialized. Geopolitical issues top the list of concerns, from trade tensions and tariffs to policy disagreements, hampering cooperation.
Escalating trade wars or new tariff implementations would make cross-border dealmaking less economical and attractive, potentially slowing global M&A momentum. Tensions with China in particular introduce complications for inbound Chinese acquisition activity or joint ventures. Policy differences on technology, finance, and other issues could also strain the business case for international expansion through M&A.
Interest rate increases pose another key risk, as higher borrowing costs would make leveraged buyouts and acquisitions financed through debt less feasible and profitable. The Federal Reserve anticipating multiple rate hikes in 2023 may discourage more acquisitive companies from aggressive balance sheet management.
Valuation concerns at historic highs suggest overpayment risks for acquirers, as most companies and private equity firms aim to achieve strong returns on investment. The potential for underperformance, if overvalued targets fail to generate projected synergies or growth, could dampen risk appetites.
Economic slowdowns or market corrections would weaken equity markets, reducing access to capital and limiting funds available to support M&A budgets. Although most economic forecasts predict stable growth, shocks around inflation, demand, supply issues, or public health could create more turbulent conditions.
New virus variants of concern could again disrupt business operations, alter strategic priorities, and inject more uncertainty, perhaps stalling segments of the M&A market temporarily if major health events transpire. While health risks may fade for some sectors, they will likely continue impacting dealmaking motivations and timing for the foreseeable future.
In conclusion, 2023 will likely witness another year of substantial M&A activity as opportunities and motivations for strategic deals abound across industries and geographies. Private equity will continue dominating as the most active acquirer, technology, healthcare, and financial services will lead the way in terms of industry focus, and cross-border dealmaking is poised to advance in kind.
While headline growth may moderate from 2021’s record levels and then dropped substantilly in 2022. Economic recovery, innovation imperative, and growth financing needs—remain largely intact and should sustain a steady, robust M&A pace for the year ahead. Geopolitical and health-related risks could create interruptions, but they seem unlikely to undermine the broader positive M&A Market outlook, at least based on current perspectives.
Challenges around high valuations, interest rates, and policy differences suggest caution is warranted, but should not deter fundamentally sound transactions that can generate long-term value. M&A will persist as a mechanism by which companies adapt to change, achieve new capabilities and scale, access growth opportunities, and enhance competitiveness—if the right deals at the right prices can be found.