after a sluggish 2022, investment bankers are cautious

On the heels of a record year 2021, investment bankers have predicted a firework of corporate acquisitions and weddings for 2022. It didn’t go as planned. According to data provider Dealogic, the global M&A market shrank by nearly 39% in 2022, to $3.66 trillion (€3.443 trillion), according to a Dec. 21 tally. Compared to the 2015-2019 average, before central banks threw open the floodgates, in response to the Covid-19 pandemic, causing a frenzy of business, this represents a 9.3% drop.

“The shocks followed. Amid the war in Ukraine, the Nasdaq crashed by more than 30%. [la Bourse américaine des valeurs technologiques], accelerating inflation, rising interest rates and now the credit crunch, the environment has become extremely volatile and many deals have been postponed”lists Hubert Preschez, partner of Messier & Associés. “Added to this unfavorable macroeconomic context is the restrictive position of the competition authorities, which have blocked transactions since the merger between TF1 and M6. »

While the European market held up better than the United States, France did not shine. Transactions involving French companies, whether buying or selling, have reached $156 billion, or 46% fewer than in 2021, according to a Dec. 13 tally from data provider Refinitiv. The lowest level observed since 2013. Ironically for this particular year, the only Italian megadeal of 2022, i.e. the takeover bid on EDF estimated at almost 10 billion dollars, was at the initiative of the state.

Financial conditions worsened

“The first half of the year remained active but, with the return of summer, nervousness crept into the markets and among our customers”explains Pierre Drevillon, head of investment banking at Citi in France. “The strategic projects are still being studied, but we observe a climate of prudence that should last at least in the first quarter. [2023], and maybe a little more. As soon as we have visibility into the trajectory of rate hikes and inflation control, this will reassure investors and producers, who can resume their merger plans. »

The threat of recession is dampening enthusiasm, but more importantly, after years of cheap and plentiful money, financial conditions, the backbone of the M&A war, have deteriorated. “The collapse of the stock markets has made raising capital more expensive, while the rise in interest rates has made credit more expensive, closing off access to even the riskiest borrowers”explains Grégoire Chertok, managing partner of Rothschild et Cie. “Furthermore, inflation causes instability in corporate costs and revenues, which become all the more difficult to evaluate. The real impact of the crisis on corporate accounts should emerge with the publication of the accounts for the first half of 2023.he continues.

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