Global Mergers and Acquisitions (M&A) shrank for the third consecutive quarter, with third-quarter activity dropping 54per cent to $716.62 billion from $1.56 trillion in the same period last year, latest data released by Dealogic shows.
A Reuters report attributed the development to rising interest rates, which forced lenders to pull back from financing large deals as well as the soaring dollar that discouraged U.S. companies from acquiring foreign targets amid persisting geopolitical tensions. Dealmakers are facing resistance when they pitch deals to their clients as annual volumes have so far lost 33per cent, with $2.97 trillion of announced deals this year, the report said.
“The backup in the leveraged finance market along with the lengthened timeline of regulatory reviews for many transactions has had an impact on dealmaking,” said Cary Kochman, global co-head of M&A at Citigroup Inc. M&A volumes in the United States plunged by nearly 63per cent in the third quarter to $255.89 billion as the rising cost of debt forced companies to postpone their pursuit of transformative buyouts. Plagued by spiraling inflation, European M&A activity suffered a 42per cent contraction in the third quarter while Asia-Pacific was down 52per cent, according to Dealogic.
“In today’s markets, most banks don’t feel comfortable underwriting a financing package of 3 to 4 billion euros for a private equity deal in Europe,” said Guillermo Baygual, cohead of EMEA M&A at JPMorgan. “Getting deals done takes much longer. The focus is purely on high-quality assets, especially in resilient industries such as infrastructure,” he said.
As the environment for dealmaking has deteriorated this year, a number of corporate buyers have chosen to walk away from earlier handshake agreements while others have postponed large buyouts altogether