Depressed Dealmaking Continues for Second Straight Year in 2023 as Fourth Quarter M&A and Equity Issuance Stays Muted

Rhea-AI Summary

S&P Global Market Intelligence's Q4 2023 M&A and Equity Offerings Market Report revealed a 19.2% year-over-year decline in global equity issuance to $295.52 billion, following a 65.3% drop in 2022. The total value of global M&A announcements also fell 26.7% to $2.27 trillion in 2023, with the number of announcements dropping 21.4% year over year. Despite these challenges, the report suggests optimism for the outlook in 2024, particularly in the M&A market.

Insights

Financial Analyst

The sustained interest rate hikes have had a notable chilling effect on global equity issuance and mergers and acquisitions (M&A) activity. The year-over-year decline in the total value of global equity issuance by 19.2% in 2023, following a significant 65.3% drop in 2022, reflects a market environment characterized by increased borrowing costs and investor caution. This trend is particularly important for companies that rely on equity markets for capital raising, as it indicates a more challenging funding landscape.

From an investor's perspective, the reduction in M&A activity, with a 26.7% decrease in total value and a 21.4% decrease in the number of announcements, suggests a market consolidation phase. This can be interpreted as an opportunity for investors to focus on companies with strong fundamentals that may be better positioned to navigate a more selective M&A environment. Additionally, the market's response to the two large deals in Q4 2023 could be a bellwether for investor sentiment and the potential for recovery in the M&A market.

Economist

The macroeconomic implications of the rate-hiking cycle are evident in the decline of dealmaking activities. The central bank's monetary policy, aimed at controlling inflation, has inadvertently slowed down the pace of corporate expansions and acquisitions. This contraction in M&A and equity issuance activities usually signals a broader economic cooldown, which may lead to a cautious approach from businesses in terms of investment and hiring, potentially dampening economic growth.

However, the report's indication of stability or possible rate cuts could suggest a pivot in the monetary policy that may encourage dealmaking in 2024. This potential shift could be a critical factor in driving economic recovery, as increased M&A activity often correlates with business confidence and economic expansion.

Market Research Analyst

Examining the sector-specific and geographic trends in M&A and equity issuance can provide strategic insights for businesses and investors. The report highlights that despite overall declines, certain sectors and regions may be experiencing divergent trends. For instance, flat deal numbers in European IPOs, despite a significant drop in their value, could indicate resilience in specific markets or an appetite for risk in certain industries.

Understanding these nuances is essential for stakeholders to identify potential growth areas and to strategize accordingly. The focus on high-valuation deals and industry trends also underscores the importance of monitoring the strategic moves of larger players, as these can set the tone for broader market dynamics and offer predictive insights into future market directions.

NEW YORK, Jan. 29, 2024 /PRNewswire/ -- The rate-hiking cycle that began in 2022 continued to depress dealmaking throughout 2023, according to S&P Global Market Intelligence's newly released Q4 2023 M&A and Equity Offerings Market Report. Although the equity markets rebounded in 2023, equity issuance did not. The total value of global equity issuance fell 19.2% year over year in 2023 to $295.52 billion, and that drop was from a low base after global equity issuance plummeted 65.3% in 2022 to $365.82 billion, from $1.055 trillion in 2021.

The fourth quarter offered some positive signs for M&A transactions with the announcement of the year's two largest deals. However, the total value of global M&A announcements fell 26.7% year over year to $2.27 trillion in 2023 while the number of announcements fell 21.4% year over year to 40,675. The drop is even more dramatic when compared to the most recent M&A peak year of 2021. The value of global M&A announcements fell 51.4% in 2023 versus 2021, and the number of announcements dropped 32.7% in 2023 versus 2021.

"There is no denying that 2023 was the second consecutive down year for M&A. The large transactions at the end of the year helped boost some optimism for the outlook. That along with stability in rates — or possible cuts — bodes well for year-over-year growth in 2024 for M&A," said Joe Mantone, lead author of the report at S&P Global Market Intelligence. "Challenges do continue to exist as geopolitical unrest and fears of a possible recession are still front of mind for dealmakers and executives. Those concerns will damper the prospects for a rapid recovery in the initial public offering (IPO) market at least in the early part of 2024."

Key highlights from the quarterly report include:

• The fourth quarter marked the eighth straight period in which total global issuance stayed at or below $100 billion after issuance averaged $232.39 billion per quarter from the start of 2020 through 2021.
• In Europe, the total value of IPOs fell 64.1% quarter over quarter to $3.69 billion, but the number of deals stayed relatively flat with 43, down from 47 in the third quarter.
• The value of global M&A announcements did grow sequentially and year over year in the fourth quarter thanks to two large transactions that made up 27.3% of the period's total.

The quarterly report provides an overview of global M&A and equity issuance trends, offering insights into the sectors and geographies that are seeing the most activity. It also focuses on deals with the highest valuations and strategies larger players pursue that underscore trends occurring throughout an industry. S&P Global Market Intelligence has produced the quarterly, global M&A and equity offering report since the first quarter of 2018.

To request a copy of the Q4 2023 Global M&A and Equity Offerings Report, please contact press.mi@spglobal.com.

S&P Global Market Intelligence's opinions, quotes, and credit-related and other analyses are statements of opinion as of the date they are expressed and not statements of fact or recommendation to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security.

About S&P Global Market Intelligence

At S&P Global Market Intelligence, we understand the importance of accurate, deep and insightful information. Our team of experts delivers unrivaled insights and leading data and technology solutions, partnering with customers to expand their perspective, operate with confidence, and make decisions with conviction.

S&P Global Market Intelligence is a division of S&P Global (NYSE: SPGI). S&P Global is the world's foremost provider of credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help many of the world's leading organizations navigate the economic landscape so they can plan for tomorrow, today. For more information, visit www.spglobal.com/marketintelligence.

Media Contact 
Amanda Oey 
S&P Global Market Intelligence
+1 212-438-1904
amanda.oey@spglobal.com

 

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SOURCE S&P Global Market Intelligence

FAQ

What is the total value of global equity issuance in 2023?

The total value of global equity issuance in 2023 fell 19.2% year over year to $295.52 billion.

How much did the global equity issuance drop in 2022?

The global equity issuance plummeted 65.3% in 2022 to $365.82 billion from $1.055 trillion in 2021.

What was the total value of global M&A announcements in 2023?

The total value of global M&A announcements fell 26.7% year over year to $2.27 trillion in 2023.

How much did the number of M&A announcements drop in 2023?

The number of M&A announcements fell 21.4% year over year to 40,675 in 2023.

What does the report suggest about the outlook for M&A in 2024?

The report suggests optimism for the outlook in 2024, particularly in the M&A market, despite the challenges faced in 2023.

How many quarters has the total global issuance stayed at or below $100 billion?

The fourth quarter marked the eighth straight period in which total global issuance stayed at or below $100 billion.

What does the report focus on?

The quarterly report provides an overview of global M&A and equity issuance trends, offering insights into the sectors and geographies that are seeing the most activity.

How long has S&P Global Market Intelligence been producing the quarterly report?

S&P Global Market Intelligence has produced the quarterly, global M&A and equity offering report since the first quarter of 2018.