after a sluggish 2022, investment bankers are cautious

In the wake of a record year 2021, investment bankers predicted, for 2022, a firework of takeovers and corporate marriages. It didn’t go as planned. According to data provider Dealogic, the global M&A market shrank nearly 39% in 2022, to $3.66 trillion (€3.443 trillion), according to a tally from the December 21. Compared to the 2015-2019 average, before central banks opened the floodgates wide, in response to the Covid-19 pandemic, causing a frenzy of deals, this represents a decline of 9.3%.

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“The shocks followed one another. Between the war in Ukraine, the collapse of more than 30% of the Nasdaq [la Bourse américaine des valeurs technologiques], inflation accelerating, interest rates rising and now the credit crunch, the environment has become extremely volatile, and many operations have been postponed”lists Hubert Preschez, partner at Messier & Associés. “To this unfavorable macroeconomic environment was added the restrictive position of the competition authorities, which blocked transactions, starting with the merger between TF1 and M6. »

While the European market held up better than the United States, France did not shine. Transactions involving French companies, for purchase or sale, reached 156 billion dollars, or 46% less than in 2021, according to the count, as of December 13, from the data provider Refinitiv. The lowest level observed since 2013. Ironically for this particular vintage, the only tricolor megadeal in 2022, namely the public buyout offer on EDF estimated at nearly 10 billion dollars, was at the initiative of the State.

Financial conditions have deteriorated

“The first half of the year remained active but, with the return of summer, nervousness set in on the markets and among our customers”explains Pierre Drevillon, head of investment banking at Citi in France. “Strategic projects are still being studied, but we observe a climate of caution which should last at least during the first quarter. [2023], and maybe a little more. As soon as we have visibility on the rate increase trajectory and the control of inflation, this will reassure investors and manufacturers, who will be able to resume their merger projects. »

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The threat of recession is dampening enthusiasm, but above all, after years of cheap and plentiful money, financial conditions – the sinews of war for mergers and acquisitions – have deteriorated. “The plunge in the equity markets has made capital increases more expensive, while the rise in interest rates has made credit more expensive, access to it being even closed for the riskiest borrowers”explains Grégoire Chertok, managing partner of Rothschild et Cie. “Furthermore, inflation causes instability in business costs and revenues, which become all the more difficult to value. The real impact of the crisis on companies’ accounts should emerge when the accounts for the first half of 2023 are published.he continues.

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