Outlook - M&A Review 2022
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In many respects, 2022 was a year of two halves: the remarkably strong market for dealmaking witnessed in 2021 continued during the first and second quarters of the year, before easing in the second half.
In many respects, 2022 was a year of two halves: the remarkably strong market for dealmaking witnessed in 2021 continued during the first and second quarters of the year, before easing in the second half. The question is whether the slowdown continues or even accelerates in 2023.
The current global economic picture suggests that a cautious approach would be wise. High interest rates and slowing growth – the IMF expects global GDP to rise by just 2.7% in 2023 – are not supportive of M&A activity. Geopolitical risk continues to loom large, not least with the ongoing conflict in Ukraine.
Increased regulatory scrutiny of Irish M&A deals is also likely to be an observable trend in 2023, with the Screening of Third Country Investments Bill expected to be passed into law during the year. Deal makers will need to factor this into their thinking, both from a timing and execution risk point of view.
Nevertheless, there are reasons to be positive about the outlook for M&A activity in Ireland. Though vulnerable to global headwinds, the country remains an outlier in economic terms, with reasonable growth levels and an enviable public finance position. Attractive businesses across a range of sectors provide a long list of potential targets. New opportunities continue to emerge, particularly in areas such as renewable energy and financial services. And perhaps the declines witnessed in public stock markets in 2022 have resulted in some adjustment to sellers’ expectations on price.
It is also possible to take a more optimistic view about the global outlook. Inflation appears to be cooling in Western economies, including the US, in which case policymakers may not have to tighten monetary policy to the extent previously feared. Indeed, US financial markets are already beginning to price in a pivot to falling interest rates. This could provide a fillip for M&A worldwide, including Ireland, in the second half of the year.
In other words, Ireland’s M&A market looks set to remain busy. While anecdotal evidence suggests that deals are moving forward cautiously and without the same velocity as in 2021 and H1 2022, many advisers are reporting strong pipelines of work. There is more dealmaking to come.
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