Mergers & Acquisitions 2022 Annual Review

4 MORRISON FOERSTER GLOBAL ACTIVITY In 2022, global M&A reached $3.6 trillion in value. The year started strong, but activity trailed off in Q3, falling below $1 trillion for the first time in eight consecutive quarters. Deal activity continued, but buyers went small, with megadeals (those valued above $10 billion) dropping 31% compared to 2021, according to Refinitiv . LOOKING AT MARKETS AROUND THE WORLD United States – Acquisitions of United States targets dropped 38% to $1.5 trillion, but United States dealmaking kept a similar market share of global activity as compared to prior years (44% in 2021 to 43% in 2022). Spinoffs increased in number despite the drop in deal volume. By contrast, de-SPAC deals, which surged in 2021, fell substantially in response to market pressures and increased SEC regulation. 2 Europe – European M&A totaled $850.7 billion, down 39% from 2021, according to Refinitiv . The war in Ukraine significantly impacted European M&A, reducing international trade, disrupting supply chains, and increasing energy costs. Asia – Dealmaking in Asia-Pacific totaled $830.7 billion, a 32% decrease and the slowest year for the region since 2019, according to Refinitiv . ESG is increasingly a consideration in Asia, as detailed in our Asia Funds ESG Report. TECH ACTIVITY Technology continued to be the top industry for acquirers, accounting for 20% of 2022 dealmaking. In our 2022 Tech M&A Survey , respondents named artificial intelligence/machine learning as the first-choice subsector for dealmaking opportunities in 2023 by a wide margin (22%), followed by e-commerce and robotic process automation, each receiving 13% of the vote. PRIVATE EQUITY Private equity acquirers continued to transact in record numbers. Though activity was down from 2021’s records, buyouts were 50% higher and exits were 43% higher than 2015-2019 numbers, according to MergerMarket . Technology was the top sector for sponsors, accounting for nearly 30% of all deals. Our annual Global PE Trends and Outlook report details these and other themes. LOOKING FORWARD Despite the macro headwinds, the strategic goals supported by well-planned M&A, including diversification (or, conversely, focusing on core businesses or separating unrelated businesses), achieving scale, and entry into new markets, remain. The trend toward digitalization continues to push tech M&A, and the volatility (and sometimes freeze) in equity markets will increase the interest in M&A of companies and investors searching for liquidity. Buyers (both private equity and corporate) have plenty of dry powder. Savvy buyers will take advantage of current pricing, and, conversely, companies need to be ready to respond to unwanted advances. Changes in currency exchange rates, such as the weakened Euro, pound, and yen, may attract some buyers. Companies also may consider other forms of transformations, such as spinoffs and carve-outs, as they seek to increase efficiencies of operating units and foster growth and investment. However, given the potential risks, buyers likely will review potential target companies and transactions carefully, doing more diligence and adjusting deal structures and terms in response to continued and new risks. Learn more about Morrison & Foerster’s Global M&A Practice.