BY Fraser Tennant
A stronger period for private equity (PE) and M&A deal activity is on the horizon following months of macroeconomic turmoil, according to a new report by BMS.
In its ‘Private Equity, M&A and Tax 2023’ report, which provides a comprehensive analysis of trends in the European, North American and Asian M&A markets, BMS suggests that while deal volumes have fallen compared to the high levels achieved in 2021 and early 2022, activity will bounce back toward the latter half of 2023,
This optimism comes despite an M&A landscape impacted by various macro developments, including the coronavirus (COVID-19) pandemic, war in Ukraine, concerns around recession, higher interest rates to curb inflation and risks associated with the recent banking crisis.
“2023 has gotten off to a subdued start compared the deal activity levels seen over the past two years,” said Tan Pawar, head of private equity and M&A at BMS. “However, momentum is growing, and we have not seen a decrease in enquiries from companies eager to obtain M&A insurance.”
Among a number of key findings, the BMS report found that: (i) a growing appetite remains in the M&A insurance market, with a 40 percent growth in insurance products purchased over the past 24 months; (ii) there has been an uptick in claims from policies underwritten during the pre-2022 M&A boom, resulting in reinsurers looking to manage risk to a much greater degree; (iii) although European M&A activity tailed off in the latter half of 2022, the tax insurance market saw a record number of enquiries; and (iv) the secondaries market remained active in 2022, with total transaction volume exceeding $100bn for the second year running.
The report also suggests that against the backdrop of an increasingly challenging macroeconomic environment and a potential global recession in 2023, distressed sales could increase.
Mr Pawar concluded: “With market conditions expected to stabilise, we should see a resurgence in deal activity by the end of the second quarter and into the second half of 2023.”
Report: Private Equity, M&A and Tax 2023