News & Analysis

driven by the PitchBook Platform
gettyimages-1216550911.jpg
M&A

Charting the cooldown in global M&A deals

Here are three charts that track the decline in M&A activity in Q2.

Perceptible macroeconomic headwinds took a toll on global M&A activity in Q2 2022, as investors and companies contended with persistent inflation, geopolitical tension, pandemic-induced supply chain issues and lower valuations.

Our latest Global M&A Report examines how M&A activity has performed as volatility picks up across the market. Here are four key takeaways from the report.

 

Global M&A deal volume declined in Q2 2022, tailing off from last year’s record-setting pace. Corporations and investors completed an estimated $1.09 trillion worth of transactions in the second quarter, representing a decline of roughly 26% from the quarter before.

North American M&A deal volume also fell, with 4,571 deals being closed in the same period, totaling $547.8 billion, down 30.2% and 37.6%, respectively, from Q4 2021.

In Europe, an estimated $365 billion worth of M&A transactions closed in Q2, down 36% from the prior quarter. However, it’s worth highlighting that economic and financial turmoil didn’t noticeably affect the appetite of private equity buyers, who continued growing their market share of European M&A deals. During the first six months of the year, more than one in three European deals was closed by a sponsor, up from 27% five years ago.

 

Slow M&A dealmaking has coincided with a drop in outsize deals. Mega-deals—defined as transactions worth $5 billion or more—amassed $207.3 billion worldwide in the second quarter, down 36% from Q1.

Still, H1 2022’s tally of mega-deals remained elevated relative to historic standards thanks to robust activity in Q1.

A handful of large, strategic acquisitions were completed in the technology sector, including Advanced Micro Devices’ $35 billion acquisition of semiconductor company Xilinx and Microsoft‘s $20 billion deal for speech-recognition software maker Nuance Communications.

 

From healthcare and IT to consumer products and financial services, a cooldown in dealmaking spread across sectors that had historically been the main drivers for mergers and acquisitions. Healthcare deal flow in Q2 fell to the lowest level since the onset of the COVID-19 pandemic, posting a decline for the third straight quarter. IT deal volume fell about 43% from the first quarter to $167 billion in Q2, as rate hikes dragged down tech stocks’ high valuation. However, even with this drastic decline, IT remained the third most active sector, making up around 20% of global M&A in the quarter, ranking only behind B2B and B2C.

Several industries shined bright even as the market meltdown spoiled appetites for M&A bets across the board. The disruption in the global supply chain contributed to deals to acquire logistics firms such as Pilot and Clipper Logistics. Meanwhile, as more people resumed travel, hospitality M&A activity also accelerated.

Energy was another bright spot in the second quarter. Higher commodity prices and Europe’s race to replace Russian energy stirred up deal activity in the sector. Energy’s share of the global M&A market climbed to 12% in Q2, almost doubled from the prior quarter.

Interest rates, caution to dampen future corporate tie-ups


Looking ahead, analysts expect a number of factors could weigh on dealmaking in the M&A space.

With inflation soaring, the Federal Reserve kept ratcheting up its benchmark interest rate to cool the economy. Higher rates, alongside increased financial uncertainty, could be a drag on corporate cash flows and deal valuations, potentially adding pressure on future M&A plans in North America. Meanwhile, as companies prepare for a potential recession and concentrate on cost savings, the pace of strategic acquisitions will likely slacken in the second half of the year.

In Europe, deal flow is also expected to slow down for the rest of the year, as companies grapple with headwinds including the prospective rate hikes by the European Central Bank, stress in junk debt markets, and elevated inflation.


Featured image by the_burtons/Getty Images

Learn more about our editorial standards.

  • Madeline Shi July 2024.jpg
    About Madeline Shi
    Senior reporter Madeline Shi writes about private equity and the debt markets for PitchBook News. Previously she has written for news outlets including Debtwire, With Intelligence (formerly Pageant Media), Business Insider and CoinDesk. Madeline earned a graduate degree from New York University’s school of journalism and is a graduate of Northeast Normal University in China. She is based in Seattle.
Join the more than 2 million industry professionals who get our daily newsletter!

    I agree to PitchBook’s privacy policy