The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2023”.
Consensus opinion coming into 2022 was that high M&A volume would continue, albeit not quite at the record-setting pace of 2021. The market had other plans. Volume decreased much more sharply from the 2021 high than was commonly expected. While overall deal volume was generally in line with averages from 2017-2020, 2022 was a tale of two halves—there was a marked drop from H1 to H2, with Q4 representing the lowest Q4 global deal volume in the past six years. Significant stock market volatility wrought havoc on valuations. Higher interest rates and a retreat by large banks from the leveraged loan market chilled leveraged buyout financing. Macroeconomic and geopolitical uncertainty turned confidence to caution. Valuation disconnects scuttled deals as sellers continued to expect 2021 multiples. Regulatory scrutiny made execution more complex. Entering 2023, many of these headwinds continue.
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