# Global dealmaking plunges as financing market hits rock bottom Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-09-30 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Global M&A Shrinks for Third Consecutive Quarter Meta Description: Learn why global M&A activities dropped by 54% in the latest quarter due to lender pullback and lack of interest in cross-border deals amidst geopolitical URL: https://financedigest.com/global-dealmaking-plunges-as-financing-market-hits-rock-bottomhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-09-30t070442z1lynxmpei8t09nrtroptp4aveva-m-a-schneider-1736815118347-compressed.jpg) By Anirban Sen, Pamela Barbaglia and Abigail Summerville NEW YORK/LONDON (Reuters) – Global M&A shrank for the third consecutive quarter as rising interest rates forced lenders to pull back from financing large deals and the soaring dollar failed to spur U.S. [companies into snapping up foreign targets](https://www.financedigest.com/britain-toughens-up-diversity-targets-for-uk-companies.html "Britain toughens up diversity targets for UK companies") amid persisting geopolitical tensions. A steep [fall in large private-equity buyouts contributed to the slowdown](https://www.financedigest.com/logitech-quarterly-sales-fall-22-as-slowdown-fears-bite.html "Logitech quarterly sales fall 22% as slowdown fears bite") in global dealmaking, with third-quarter activity dropping 54% to $716.62 billion from $1.56 trillion in the same period last year, according to Dealogic data. [Dealmakers are facing](https://www.financedigest.com/just-eat-takeaway-faces-shareholder-backlash-over-dealmaking.html "Just Eat Takeaway faces shareholder backlash over dealmaking") resistance when they pitch deals to their clients as annual volumes have so far lost 33%, with $2.97 trillion of announced deals this year. The backup in the [leveraged finance market](https://www.financedigest.com/the-eyewear-market-to-leverage-the-digital-disruption-wave.html "The Eyewear Market To Leverage The Digital Disruption Wave") along with the lengthened timeline of regulatory reviews for many transactions has had an impact on dealmaking,” said Cary Kochman, global co-head of M&A at Citigroup Inc. M&A volumes in the United States plunged by nearly 63% in the third quarter to $255.89 [billion as the rising cost](https://www.financedigest.com/australias-nuclear-submarine-plan-to-cost-up-to-245-billion-by-2055-defence-official.html "Australia’s nuclear submarine plan to cost up to 5 billion by 2055 -defence official") of debt forced companies to postpone their pursuit of transformative buyouts. Plagued by spiraling inflation, European M&A activity suffered a 42% [contraction in the third quarter](https://www.financedigest.com/german-gdp-contracted-by-0-4-in-the-fourth-quarter.html "German GDP contracted by 0.4% in the fourth quarter") while Asia-Pacific was down 52%, according to Dealogic. In today’s markets, most [banks don’t feel comfortable underwriting a financing](https://www.financedigest.com/why-finance-professionals-must-bank-on-a-journey-to-the-cloud.html "Why finance professionals must bank on a journey to the cloud") package of 3 to 4 billion euros for a private equity deal in Europe,” said Guillermo Baygual, co-head of EMEA M&A at JPMorgan. “Getting deals done takes much longer. The focus is purely on high-quality assets, especially in [resilient industries](https://www.financedigest.com/german-heat-pump-bonanza-test-industrys-resilience-in-russian-gas-crunch.html "German heat pump bonanza test industry’s resilience in Russian gas crunch") such as infrastructure,” he said. Wall Street [banks had to stomach a loss of roughly $700 million linked to the underwriting of the $16.5 billion](https://www.financedigest.com/credit-suisse-54-billion-lifeline-offers-limited-respite-to-global-banks.html "Credit Suisse billion lifeline offers limited respite to global banks") leveraged buyout of Citrix. As the environment for dealmaking has deteriorated this year, a number of [corporate buyers have chosen to walk away from earlier handshake agreements while others have postponed large](https://www.financedigest.com/banks-recover-75-of-defaulted-debt-owed-by-large-corporate-borrowers-finds-new-global-credit-data-report.html "Banks recover 75% of defaulted debt owed by large corporate borrowers, finds new Global Credit Data report") buyouts altogether. “I don’t think we’ve hit the bottom yet. Today’s market is just all over the place and people are still a little bit spooked,” said Melissa Sawyer, [global head](https://www.financedigest.com/new-york-catches-up-with-london-to-head-citys-global-centres-survey.html "New York catches up with London to head City’s global centres survey") of the M&A group at Sullivan & Cromwell LLP. Still, some large [deals were signed](https://www.financedigest.com/italys-nexi-signs-digital-payments-deal-with-tims-olivetti.html "Italy’s Nexi signs digital payments deal with TIM’s Olivetti") during the quarter. Notable transactions included Adobe Inc’s $20 billion acquisition of design software company Figma and Oak Street’s $14 billion take-private deal for [real estate](https://www.financedigest.com/gold-london-real-estate-and-the-theresa-may-effect.html "GOLD, LONDON REAL ESTATE AND THE THERESA MAY EFFECT") investment trust Store Capital Corp. In Britain – where on Sept. 26 the [pound plunged to an all-time low against the dollar](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure") – Schneider Electric’s 9.5 billion-pound proposed takeover of British software firm Aveva was a rare attempt to revamp activity in Europe’s biggest M&A market. For an interactive graphic, click here: CURRENCY DISLOCATION While valuations are sinking, U.S. buyers have so far taken a cautious stance on doing deals overseas and making currency-driven bets amid concerns over the war in Ukraine and [Europe’s energy crisis](https://www.financedigest.com/europes-energy-crisis-and-the-nuclear-path-out.html "Europe’s energy crisis and the nuclear path out"). Currency dislocation can [create opportunism](https://www.financedigest.com/grain-and-cereal-crop-market-novel-technological-solutions-will-create-lucrative-growth-opportunities.html "Grain And Cereal Crop Market : Novel Technological Solutions Will Create Lucrative Growth Opportunities"). But if you’re a U.S. buyer you also need to look at the long-term value creation thesis and right now you won’t get any upside from your [target’s sterling earnings](https://www.financedigest.com/disney-streaming-beats-wall-street-targets-earnings-miss.html "Disney streaming beats Wall Street targets, earnings miss") which have been weakened by the latest currency fluctuations,” said Dwayne Lysaght, co-head of EMEA M&A at JPMorgan. Corporate confidence in [markets being supportive of dealmaking – widely seen](https://www.financedigest.com/analysis-ecb-seen-struggling-to-keep-market-on-side-after-mixed-messages.html "Analysis-ECB seen struggling to keep market on side after mixed messages") as the leading indicator for M&A activity – has plummeted as a long-lasting recession is looming. You have a whole generation of people who haven’t seen [interest rates](https://www.financedigest.com/ecb-raises-interest-rates-again-cuts-bank-subsidies.html "ECB raises interest rates again, cuts bank subsidies") rise this precipitously and no one really knows where it will stop. That could have a huge impact, not just on valuations, but also on the underlying [economy,” said Matthew](https://www.financedigest.com/hurricane-matthew-causes-up-to-15bn-impact-to-us-and-caribbean-economies-in-october-according-to-aon-catastrophe-report.html "Hurricane Matthew causes up to bn impact to US and Caribbean economies in October, according to Aon catastrophe report") Abbott, global co-chair of the M&A group at Paul, Weiss, Rifkind, Wharton & Garrison LLP. Going [forward dealmakers expect](https://www.financedigest.com/the-biochemistry-analyser-market-is-expected-to-witness-an-escalation-going-forward.html "The Biochemistry Analyser Market is expected to witness an escalation going forward") more domestic tie-ups, mostly funded by stock, to help companies withstand the storm. As a reaction to macroeconomic pressures, some large all-stock mergers will be certainly under consideration as a way to [gain efficiencies and tackle sluggish top-line growth and inflation](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro") in the cost base. The rationale for dealmaking will rely on the ability to take out costs and address operational overlap,” said Derek Shakespeare, chairman of EMEA M&A at [Deutsche Bank](https://www.financedigest.com/deutsche-bank-equity-bear-market-rally-will-stretch-into-2023-dollar-weaker.html "Deutsche Bank: Equity bear market rally will stretch into 2023, dollar weaker"). Meanwhile, some [companies could pursue hostile deals](https://www.financedigest.com/navigating-a-buoyant-ma-market-does-the-deal-corridor-with-the-us-or-eu-offer-british-companies-the-better-scope-for-growth.html "Navigating a buoyant M&A market: Does the deal corridor with the US or EU offer British companies the better scope for growth?") if boardrooms are not willing to play ball. “On the public M&A side, (proactive outreaches) may lead to some more aggressive or hostile activity where buyers don’t take no for an answer and decide to go directly to the shareholders,” said Marc-Anthony Hourihan, global M&A co-head at UBS. Yet deals have to go through a longer gestation period due to increased antitrust scrutiny, especially in sectors such as [Big Tech](https://www.financedigest.com/startups-spring-from-ashes-of-big-tech-purge.html "Startups spring from ashes of Big Tech purge"). Lengthy regulatory reviews have pressured buyers to offer so-called reverse break-up fees they would [need to pay](https://www.financedigest.com/weighing-up-buy-now-pay-later-what-you-need-to-know-before-you-invest.html "Weighing up Buy Now, Pay Later: What you need to know before you invest") if they were unable to consummate the deal. “Reverse break-up fees are a contractual technique that we’re using to help people overcome their fear of wacky and unpredictable outcomes from the regulators,” said Sawyer of Sullivan & Cromwell. ($1 = 0.9033 pound) (Reporting by Anirban Sen and Abigail Summerville in New [York and Pamela Barbaglia in London; Editing by Matthew Lewis)](https://www.financedigest.com/new-york-holds-top-spot-london-second-in-z-yen-financial-centre-survey.html "New York holds top spot, London second in Z/Yen financial centre survey") --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---