Global dealmaking fell to its lowest level since the coronavirus pandemic as surging inflation, stricter regulation, and the war in Ukraine led to a slowdown in what had been a record period of mergers and acquisitions, reported The Financial Times.
According to Refinitiv data, just over $1 trillion worth of deals were struck in the first quarter of 2022, 23% lower than the same period last year, with all continents facing a decline in M&A activity.
On the other hand, Private equity groups enjoyed their strongest ever start to the year, deploying vast cash piles accumulated during the pandemic. Buyout groups backed $288 billion worth of deals, a 17% rise compared with the first three months of 2021.
“The uncertainty from geopolitical tensions, lower GDP growth, inflation, and the commodity cycle would typically dampen M&A activity. But the ambitions that we see among CEOs and boards to grow their businesses remain quite high,” stated Avinash Mehrotra, global head of activism and shareholder advisory at Goldman Sachs.
As per the Financial Times, the value of canceled deals peaked in 1Q21 at $215 billion, the highest level since 2018. About three-quarters of all abandoned deals involved a European target, highlighting the stricter regulatory stance taken by the UK and European competition authorities.
The rate of abandoned deals involving special purpose acquisition companies also increased as the SPAC merger frenzy of the past two years gave way to heightened regulatory scrutiny and poor performance.
SPAC mergers accounted for 3% of total global dealmaking, compared with 17% in the same period in 2021. The SPAC initial public offerings fell 78% this year compared with 1Q21, while just 38 mergers have been completed.
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