• Q3 M&A activity down 54%
  • US M&A market shrinks by 63%
  • A Strong Dollar Can’t Renew Volume
  • Geopolitics, key concerns of the energy crisis

NEW YORK/LONDON (Reuters) – Global M&A contracted for the third straight quarter. Rising interest rates forced lenders to hold back on financing large deals, a strong dollar discouraged U.S. businesses and failed to attract foreign targets amid ongoing geopolitical tensions. rice field. .

A sharp decline in large private equity acquisitions contributed to a slowdown in global dealmaking, with third-quarter activity down 54% to $716.6 billion from $1.56 trillion in the same period last year, according to Dealogic data. $20 million.

Deal makers face resistance when pitching deals to clients as deals announced this year reach $2.97 trillion and annual deal volume is down 33% to date.

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“The backing of the leveraged finance market and longer regulatory review timelines for many deals has impacted dealmaking,” said Carrie Kochman, global co-head of mergers and acquisitions at Citigroup. rice field.

US M&A value plunged nearly 63% in the third quarter to $255.89 billion. This is because rising debt costs have forced companies to postpone pursuing transformational acquisitions.

Plagued by a spike in inflation, M&A activity in Europe contracted by 42% in the third quarter and Asia-Pacific by 52%, according to Dealogic.

Guillermo Beigual, co-head of EMEA M&A at JP Morgan, said: “In today’s market, most banks are willing to underwrite €3 billion to €4 billion financing packages for private equity deals in Europe. I feel resistance,” he said.

“It takes much longer to complete the deal. The focus is purely on quality assets, especially in resilient industries such as infrastructure,” he said.

Wall Street banks had to expect losses of about $700 million in connection with underwriting the $16.5 billion leveraged buyout of Citrix (CTXS.O).read more

As the trading environment deteriorated this year, many corporate buyers chose to pull out of previous handshake deals, while others postponed big acquisitions altogether.

“I don’t think we’ve bottomed out yet,” said Melissa Sawyer, global head of M&A group at Sullivan & Cromwell LLP. .

Still, some big deals were closed during the quarter.

Notable deals include Adobe’s (ADBE.O) $20 billion acquisition of design software company Figma and Oak Street’s $14 billion private deal of real estate investment trust Store Capital (STOR.N). It is included.

In the UK, where the pound plummeted to an all-time low against the dollar on Sept. 26, Schneider Electric (SCHN.PA) proposed a £9.5 billion takeover of British software firm Aveva (AVV.L), but reformed. It was an unusual attempt to try His activities in Europe’s largest M&A market.

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currency confusion

Valuations have fallen, but U.S. buyers have so far been cautious about offshore deals and currency-driven bets amid concerns about war in Ukraine and the energy crisis in Europe.

“Currency turmoil can create opportunism. But if you are a U.S. buyer, you also need to look at your long-term value creation thesis and, at the moment, you are undermined by the latest currency. We’re not getting any upside from Target’s net income, which is currency volatility,” said Dwayne Lysakt, co-head of EMEA M&A at JP Morgan.

Business confidence in the market backing deals, widely seen as a leading indicator of M&A activity, is plummeting as a prolonged recession looms.

“There is a generation of people who have never seen interest rates rise so sharply and who knows where it will stop,” Matthew said. has potential,” he said. Abbott, Global Co-Chair of his M&A Group at Paul, Weiss, Rifkind, Wharton & Garrison LLP, said:

Upcoming dealmakers expect more domestic partnerships, mostly equity-funded, to help companies weather the storm.

“In response to macroeconomic pressures, some large all-stock mergers are certainly being considered as a way to increase efficiency and deal with sluggish top-line growth and cost-based inflation. The rationale for this is to reduce costs and address duplication of work,” said Derek Shakespeare, Chairman of EMEA M&A at Deutsche Bank (DBKGn.DE).

On the other hand, if the board is demoralized, some companies may enter into a hostile deal.

“On the public M&A side,[active outreach]can be more aggressive or hostile, where the buyer doesn’t say no, but directly appeals to shareholders,” says Mark Anthony Houlihan of Global M&A. We can be connected,” he said. Head of UBS (UBSG.S).

But deals have to go through a longer period, especially in sectors such as big tech, due to increased antitrust scrutiny.

Prolonged scrutiny by regulators has put pressure on buyers to offer so-called reverse split fees that they have to pay if they fail to complete the transaction.

Sullivan & Cromwell’s Sawyer said:

($1 = £0.9033)

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Reporting by Anirban Sen and Abigail Summerville, New York, and Pamela Barbaglia, London Editing by Matthew Lewis

Our Standards: Thomson Reuters Trust Principles.

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