U.S. mergers and acquisitions activity fell 40% year-on-year in volume terms, but dealmakers expect a stronger dollar in the coming months as buyers get cheaper assets in the U.K. and Europe. I hope that.
Only $1.2 trillion has been agreed in the US so far this year, according to Refinitiv data. This is the slowest nine months preceding the trading boom since the coronavirus pandemic began in 2020. By comparison, M&A volume fell by 30% in Asia-Pacific and by 25% in Europe during the same period.
But US dealmakers found themselves in a strong position in cross-border deals as the UK and Europe wrestle with the cost of living crisis and the war at hand.
Guy Hayward Cole, head of Europe, Middle East and Africa advisory at Nomura Securities, said the plunge in the pound in recent weeks has created an opportunity for many U.S. buyers. “If you thought UK stocks were cheap beforehand, they’re very cheap for those with dollars,” he said.
However, he warned that buyers might want to take their time. “As the UK outlook becomes so uncertain, will it hold off on buying or will it actually attract bargain hunters? It could be interesting and opportunistic for us,” he said. “Others will want to sit back and see what happens for a while.”
Global M&A fell 34% year-on-year to $2.7 trillion in the nine months to September. The dealmaker said he closed $642 billion worth of deals in the third quarter, breaking his historic M&A record that saw global deals surpass $1 trillion for the eighth straight quarter.
“With the global economy facing severe headwinds, M&A activity has been the biggest casualty,” said Frank Aquila, Senior M&A Partner at Sullivan & Cromwell.
Once a bright spot in the M&A market, private equity firms face a unique reckoning as funding conditions tighten and their ability to execute large deals is hampered. In his first nine months of the year, his $642 billion buyouts globally fell 26%.
Earlier this year, a series of big deals, including the $16.5 billion privatization of Citrix and the $16 billion privatization of Nielsen, suggested the deal could again exceed $1 trillion. I was. His $44 billion acquisition of his Twitter by Elon Musk has raised hopes, but the South African billionaire is now battling a legal battle to reverse the acquisition.
Rapidly rising interest rates amid rapid inflation and the civil war in Ukraine have made it difficult for banks to sell financing packages for such acquisitions, reducing their ability to make new loans.
The third quarter was the lowest institutional loan issuance since 2009, down 85% from the same period last year, according to Michele Cousins, Americas head of leveraged finance at UBS.
Earlier in September, a group of lenders led by Bank of America and Credit Suisse sold $8.55 billion of debt to finance the Citrix acquisition at a steep discount, making up a portion of the overall $15 billion financing. Absorbed over $600 million in losses while retaining the riskiest part of
The bad debt sale raised hopes that banks could clear their inventory of unsold funding commitments by the end of the year and free up their capacity to make new loans.
Many large software-focused buyouts sidestepped the frozen loan market this summer by turning to direct lenders such as Blackstone Credit, Ares, Sixth Street and Blue Owl.
Joshua Easterly, co-president of 6th Street Specialty Lending, said:
A bright spot for dealmakers is demand for acquisitions among companies owned by private equity firms. David Mussafer, his partner managing Advent International, told the Financial Times that he has asked companies to outline their M&A goals by the next board meeting.
Mussafer, who closed a $25 billion fundraising round in May, said, “My message to portfolio companies is, come back and tell us your three best acquisition ideas.