2 Morrison Foerster Global Activity Global activity through December 15 reached $2.9 trillion in value, down 23% year-over-year. North America – North America deals totaled $1.46 trillion, down 12% from 2022. The second half of the year saw promising activity, with several megadeals announced in September and October, including Cisco’s agreement to acquire Splunk, Exxon’s agreement to acquire Pioneer, and Chevron’s agreement to acquire Hess. U.S. capital markets were buoyed in September by Arm’s $5 billion debut on Nasdaq (in which MoFo represented Arm), the largest IPO since 2021. Asia-Pacific – Asia-Pacific deals totaled $708.2 billion, a 26% year-over-year decline. Among other things, cross-border activity between China and the U.S. continued to stall. Japan was a bright spot, with the number of deals up 34% compared to 2022. Healthcare M&A in APAC saw its highest value level ever, and auto industry M&A was up 80% year over year. Europe – EMEA saw $676 billion in deal activity, a 35% drop compared to 2022. U.S. companies led the most in-bound acquisitions, with deals valued at $89 billion. Much like the global M&A market, the number of EMEA deals saw a notable increase in Q4, up 13% compared with Q3. Tech Tech remained a top choice for dealmakers, accounting for 27% of deal value. In our 2023 Tech M&A Survey, dealmakers picked cybersecurity as the most promising subsector for deals over the next 12 months, with the AI sector also presenting strong dealmaking opportunities. Healthcare Healthcare continued to perform. In North America, healthcare was the third-highest sector by volume, led by several large M&A transactions, including Pfizer’s $43 billion takeover of Seagen. As noted above, healthcare M&A in APAC saw its highest value level ever. Private Equity Sponsors took a cautious approach to M&A, with global private equity deals dropping 33% in volume and 41% in value year over year. In the face of rising interest rates, tightening credit markets, and other headwinds, sponsors adjusted their approaches to dealmaking, using relatively more equity, additional seller rollovers, and (as discussed below) private credit financing. Looking forward, 91% of PE firms surveyed in our 2023 Tech M&A Survey expect to use minority investments in their future tech transactional activity, up noticeably from 55% in 2022. ESG in M&A ESG is playing an increasingly important role in dealmaking. In our 2023 GCs and ESG Report, conducted in partnership with Corporate Counsel, 45% of respondents indicated that their companies take ESG factors into account when engaging in M&A activity; in the tech space, respondents to our Tech M&A Survey scored ESG as significant (7.85 out of 10) in choosing their most recent target, and even more so (8.45) with respect to selecting their next target. Flexibility a Necessity Companies more frequently used minority/staged investments, earnouts, and CVRs, to reach agreements and to balance out traditional and new risks. The use of stock as consideration (in whole or in part) increased relative to 2022, potentially reflecting an attempt to align incentives in the face of volatility as well as the rise in equity markets later in the year. Carve-outs and divestitures were popular approaches, and spinoffs resurged in the second half, including Danaher’s $23.3 billion spinoff of Veralto. Companies that in a stronger deal market might have been sold were seen taking steps to stay independent longer, raising funds in other ways where needed but keeping an eye on potential exits. Looking Forward For 2024, dealmakers generally anticipate that the M&A environment will continue the trend from Q4 and improve. Inflation has fallen, though not yet to the Fed’s target. Interest rates have stabilized and may start to decline. Private credit has become more widely available, for more kinds of deals, and traditional credit markets are starting to improve. Equity markets, while Visit our 2023 Tech M&A Survey to learn more about anticipated tech M&A trends. Visit our 2023 GCs and ESG Report to read more about organizational, individual, and departmental attitudes and approaches to environmental, social, and governance (ESG) issues.
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