AON, a leading global professional services firm, and Mergermarket, a provider of intelligence, data and analysis of global M&A, today released the latest edition of their M&A Risk in Review series, covering the first half of 2023.
According to Aon and Mergermarket’s survey of 50 senior executives from corporate development teams, private equity firms and investment banks, dealmakers remain upbeat about the health of the M&A arena. Nearly half of respondents – 46 percent – expect the number of deals globally to increase somewhat or significantly over the next 12 months compared to 2022. A further 20 percent expect figures for the year ahead to remain in line with current volumes.
“We are excited to share these important market insights that can help shape better decisions as the deal environment continues to evolve and poses new challenges,” said Gary Blitz, global co-CEO of Aon’s M&A and Transaction Solutions. “By taking this broad view of the M&A landscape, dealmakers are better able to understand and respond to critical risks that can have an impact on a deal’s success.”
This does not necessarily mean that sailing will be smooth – from climate, tax and cyber risk to market dislocation and geopolitical uncertainty, rarely before have M&A strategies had their mettle tested by such varied forms of volatility simultaneously. Dealmakers must be proactive in controlling whatever risks they can, install mitigation plans for those outside their direct influence and use risk transfer solutions when available.
“Dealmaking is about balancing risk and return,” said Alistair Lester, global co-CEO in Aon’s M&A and Transaction Solutions. “With strong risk mitigation processes in place, including a multi-disciplined approach to due diligence and the strategic use of insurance capital, dealmakers are able to transform their risk into opportunity to improve their deal outcomes.”
The M&A Risk in Review series explores these dynamics in detail, reporting on investors’ expectations for global M&A over the next 12 months, standout sectors and the key risks they see – and how best to mitigate them.
Additional highlights of the report include:
- 68 percent of respondents identify Technology, Media and Telecom (TMT) as likely to be the most prolific generator of M&A activity over the next 12 months. Conversely, the financial services sector is forecast by 32 percent of respondents to be the least prolific sector for dealmaking.
- 72 percent of respondents expect financing conditions to worsen compared to 2022, including 38 percent who expect them to become much more challenging. In response, dealmakers are turning toward alternative financing sources, including private equity (64 percent) and non-bank lending (38 percent).
- 96 percent of respondents expect Environmental, Social and Governance (ESG) scrutiny in deals to increase over the next three years, including 48 percent who expect it to increase significantly. In addition, 24 percent say environmental litigation creates the most concern in respect of potential disputes in a deal.