- Mar 27, 2023

Global Cross-border M&A

A Global Perspective of the M&A Market

Key Takeaways

· M&A activity in 2021 was at a record high, with global M&A volume exceeding $5.8 trillion.

· 36% of the deals in 2021 were cross-border, with Canadian, French, German, Japanese, and U.K. acquirers accounting for 40% of cross-border deals involving U.S. targets.

· Despite challenges in the current climate, cross-border transactions into the U.S. are expected to continue to offer opportunities.

· Global M&A volumes and values declined in 2022 but remained above 2020 and pre-pandemic levels.

· Trends varied across countries and regions, with the greatest decline in China and increased interest in India as an investment destination.

· M&A performed better in Europe, the Middle East, and Africa (EMEA) than in other regions, with activity 17% higher than pre-pandemic 2019 levels.

· Deal volumes and values declined in the Americas in 2022 due to macroeconomic, regulatory, and geopolitical factors.

2021 was the most active year for M&A on record. There can be no other headline for the relentless boom in M&A over the twelve months that ended December 31, 2021, during which global M&A volume exceeded $5.8 trillion, the highest annual volume on record. Each of the four quarters of 2021 placed in the top six most active quarters in global M&A by volume since the beginning of 2010. As always, however, the headline figures do not tell the whole story, as M&A in 2021 was historically robust and as complex and multi-faceted as ever.

The promise of cross-border deals proved as enticing in this environment as any other.

Of last year’s deals, $2.1 trillion, or 36% (including four of the 10 largest deals), were cross-border – in excess of averages of $1.3 trillion and 35% over the prior ten years. Approximately 20% of last year’s $2.6 trillion U.S. deal volume involved non-U.S. acquirors. Canadian, French, German, Japanese, and U.K. acquirers accounted for approximately 40% of the volume of cross-border deals involving U.S. targets, while acquirers from China, India and other emerging economies accounted for approximately 3%.

M&A in 2021 weathered the rise of coronavirus variants, supply chain disruption, and the consumer price index, and even with the exponential arrival and surge of the Omicron variant, 2022 opens with a sense of optimism that seemed much more fragile just twelve record-breaking months ago.

Despite the inevitable and unique uncertainties inherent in the current climate, we expect cross-border transactions in the U.S. to continue to offer compelling opportunities. As always, transacting parties will do better if they are well-prepared for the cultural, political, regulatory and technical complexity inherent in cross-border deals. Now, more than ever, advance preparation, strategic implementation and deal structures calibrated to likely concerns are critically important.

The following is our updated checklist of issues that should be carefully considered in advance of an acquisition or strategic investment in the U.S. Because each cross-border deal is unique, the relative significance of the issues discussed below will depend upon the specific facts, circumstances and dynamics of each particular situation. There is no one cookie-cutter roadmap to success.

Overview

Global M&A volumes and values declined in 2022 by 17% and 37%, respectively, from record-breaking 2021 levels, although both remained above 2020 and pre-pandemic levels. The high levels of M&A activity from 2021 continued into the early part of 2022, but as headwinds continued to grow, each successive quarter reported a decline in deal activity over the prior one. Deal volumes and values declined by 25% and 51%, respectively, in the second half of 2022 compared to the prior year period. However, trends varied across countries and regions. This is indicative of a broader shift by investors to find opportunities and growth in other markets, as we detail further below:

Asia Pacific

Deal volumes and values declined by 23% and 33%, respectively, between 2021 and 2022, with the greatest declines in China, where deal volumes and values decreased by 46% and 35%, respectively. M&A in China has slowed domestically in response to the country’s pandemic-related challenges and weakening demand for exports. Companies seeking access to Asian markets are increasingly looking beyond China—to India, Japan and other countries within Southeast Asia—for investment opportunities. India has emerged as an increasingly attractive destination for investment, overtaking Japan and South Korea in deal values to rank second in the region behind China.

EMEA

M&A performed better in Europe, the Middle East and Africa (EMEA) than in the Asia Pacific and Americas regions, in spite of the impact on markets of higher energy costs and a drop in investor confidence. Deal volumes and values across EMEA declined by 12% and 37%, respectively, between 2021 and 2022. With 20,000 deals in 2022, activity in the region was 17% higher than pre-pandemic 2019 levels.

Americas

Deal volumes and values declined by 17% and 40%, respectively, between 2021 and 2022 due to a combination of macroeconomic, regulatory and geopolitical factors. Deal values were particularly hard-hit, and the number of US megadeals—transactions with a value in excess of US$5bn—almost halved between 2021 and 2022 from 81 to 42, respectively. The decline in the second half of the year was more acute, with just 16 megadeals in the second half of 2022 compared with 26 in the first half of the year.

Information Source:

Global M&A Industry Trends: 2023 Outlook, PwC, 2023.
Cross-Border M&A: 2022 Checklist for Successful Acquisition in the U.S. Harvard Law School Forum on Corporate Governance, 2022.

PACIFICA ADVISORS

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Pacifica Advisors offers mergers and acquisitions (M&A) advisory services to small- and medium-sized businesses with an enterprise value of $5 to $150 million throughout the Western US and Mexico. Our mission is straightforward: to maximize value in selling your business.