High Asset

Global M&A Fell 29% in the First Quarter


Don’t expect 2022 to produce another record-breaking year in mergers. Volatility and the war in Ukraine has caused the number of announced global mergers in the first quarter to drop by about 29%.

There have been 6,436 announced global combinations, totaling $989.4 billion, as of March 29, Dealogic said. This compares to 9,022 announced global transactions, valued at $1.4 trillion, for the same period last year.

Announced U.S. mergers saw a similar plunge. There were 1,958 transactions, valued at $503.5 billion, in the first quarter. This is an 18% drop from the 2,384 deals, totaling $685.4 billion, for the comparable period in 2021. 

“M&A activity will slow down somewhat from last year as volatility in the financial markets introduces an element of uncertainty,” Jonathan Rouner, vice chairman of Nomura, told Barron’s. “With interest rates rising and share prices swinging around, it makes it harder to value businesses and take public companies private.”

A decline in special-purpose acquisition companies contributed to the slowdown. SPAC mergers represented about 20% of the U.S. M&A activity last year, bankers said. There have been just 16 SPAC combinations—where a blank-check company merges with a business—as of March 29, totaling about $7.6 billion. This represents a 78% plunge from the 74 SPAC transactions, representing $173.2 billion, for the same period in 2021.

The decline comes after a record year for mergers in 2021, when the value of global mergers reached an all-time high of $5.9 trillion, according to Bain & Co’s “Global M&A Report 2022.” Deals included $3.4 trillion from corporate buyers, $1 trillion from private equity, $466 billion in venture-capital transactions, $586.7 billion in SPACs, and $357.6 billion in portfolio add-ons, Bain said. 

Brian Miner, a partner at law firm Schulte Roth & Zabel who focuses on middle-market private-equity deals, doesn’t think the first quarter was actually much slower than last year. Many companies pushed up their processes to avoid possible tax reform and take part in the frenzy of high valuations some businesses were commanding. Tech assets sold for 25 times earnings before interest, taxes, depreciation, and amortization, or Ebitda, in 2021 while health-care businesses were going for median multiples of 20 times, according to Bain.

“There were a lot of deals slated to hit the market in the first quarter that sellers decided to move up into the fourth quarter,” Miner said.

The biggest deal so far this year is


(ticker: MSFT) buy of

Activision Blizzard

(ATVI) for $75 billion. The

Blackstone Group

(BX) $23.8 billion agreement for Mileway ranks as the second largest global deal, and the biggest private-equity transaction this year. 

One area of mergers that is not slowing down is activism. The number of activist campaigns rose 10% this year to 64 globally, according to Amy Lissauer, global head of activism, and raid defense at Bank of America.

During the last slowdown in 2020, when the Covid-19 pandemic caused M&A to go on pause, public activist campaigns went on hold. That’s not happening this year, Lissauer said. Activists had about $200.7 billion of assets under management at the end of 2021, according to “The Activist Investing Annual Review” from Insightia.

“The pace of activism has significantly increased despite a slowdown in M&A,” Lissauer said. Some of the bigger names where activists pushed for change include

Peloton Interactive





), and

Janus Henderson Group


Another trend this year is the drop in valuations. Financial technology was a busy sector in 2021 with high-growth payments companies selling for about 20 times revenue or more, according to Claudio Alvarez, a partner with GP Bullhound, a technology advisory and investment firm. (Fintechs are typically unprofitable and trade on multiples of revenue.) Those same fintechs are now going for 10 to 15 times, he said. “Investors have recalibrated their portfolios, shifting away from growth to more conservative stocks that pay a dividend or perform well in an inflationary environment,” Alvarez said.

The lower valuations are causing a disconnect between buyers and sellers, according to Matthew Epstein, managing partner and founder of Newbold Partners, a boutique, fintech-focused investment bank. Sellers are still expecting the high prices of 2021 while buyers are pitching lower offers. It will take time for sellers to accept the newer prices but once they do, M&A should pick up. Epstein, however, doesn’t expect activity to match 2021’s levels. “Last year was a high,” he said.

One group that will likely benefit from the lower valuations is private equity. Global buyout activity dropped by about 19% to 1,279 announced transactions valued at $325.2 billion, while U.S. Private-equity deals fell by 16% to 587 announced mergers, totaling $157.3 billion. The global private-equity industry had $1.8 trillion in dry power as of March, according to Preqin. Buyout shops are under pressure to put this money to work.

The only thing that could slow private-equity down, outside of the U.S. economy seizing up or macro geopolitical conditions like war, is interest rates, which remain historically very low, Schulte Roth’s Miner said. “There is nothing more stressful for private equity professionals than putting their commitments to work. It’s burning a hole in their pocket,” he said. 

Write to Luisa Beltran at luisa.beltran@dowjones.com


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