2023 Global M&A transactions show innovation thrives amid challenging conditions

Research shows that confident deal-making in turbulent times can deliver outsize returns, and we are seeing corporates and financial sponsors deploying novel tactics to manage heightened execution risk. Our latest edition of M&A Insights explores how this creative structuring is helping them gain a competitive advantage.

Our report looks at key trends including the increased influence of Middle Eastern sovereign wealth funds and their role in reshaping global deal terms, the impact of sweeping changes to the U.S. merger control filing process, a shift in approach to tech M&A among traditional companies pursuing technological transformation, the prospects for M&A activism in a major European market, and how ground-breaking U.S. energy policies have sparked a wave of innovative deal-making.

Dirk Meeus, co-head of Allen & Overy’s global corporate practice, commented: “We are seeing companies use complex, innovative deal structures to seize opportunities despite the market headwinds.”

David Broadley, who leads A&O’s corporate practice alongside Dirk, added: “We think that as more of these deals reach completion it will give other market participants the confidence to pursue transactions. This is why we remain bullish on the prospects of stronger deal volume through the second half of the year.”

Key highlights include:

• From January 2023-June 2023, global deal value stood at USD1.2 trillion, around one third of 2022’s annual total. While this points to a year-on-year decline, M&A activity was up in Q2 compared to Q1.
• Middle Eastern sovereign wealth funds have become increasingly influential deal-makers on the global stage. While oil prices have fallen from their 2022 peak, the revenues of Middle Eastern SWFs have grown significantly over the past 12 months. The region’s SWFs more than doubled their investments in Western economies to USD51.6 billion and have developed a higher tolerance for risk as they seek to diversify their national economies.
• Proposed changes to the U.S. merger review process by the Federal Trade Commission (FTC) and Department of Justice (DoJ) will significantly increase the information burden on deal-makers. The planned revisions will dramatically expand the scope of information that merging parties will need to submit up front.
• Energy producers, mining companies and industrial manufacturers are striving to reduce their environmental impact. The complexity of developing low-carbon solutions is driving them to adopt strategies more akin to traditional venture capital investing, and to enter into cross-sector, cross-border collaboration deals to develop systems that have applications in a range of settings. These partnerships help companies prove concepts with less financial risk and scale up their activities once they know the technology works.
• The U.S. Inflation Reduction Act and Infrastructure Investment and Jobs Act have seen more than USD150 billion of investment in domestic utility-scale clean energy projects announced since August 2022, more than in the previous five years combined.
• With the IMF predicting that Germany will go into a recession this year, investment banks are reporting more take-private processes kicking off. We can expect this to spark activity among arbitrage funds, with features of the German regulatory framework making it a prime market for this type of investing.

For more information, read the full report here.