Global M&A appetite expected to grow, most bullish on Asia: report

DESPITE mergers and acquisition (M&A) volumes falling for the fourth consecutive quarter in Q1 2023, appetite for dealmaking is still expected to rise this year with Asia’s M&A-related financing expected to grow the most.

A report by global law firm Norton Rose Fulbright (NRF) and M&A intelligence provider Mergermarket showed that 60 per cent of respondents expect securing deal financing to become “somewhat easier” in Asia, with only 6 per cent expecting conditions to be more difficult in the year ahead.

This is because dealmaking in Asia “relies less heavily on pure financing” as other sources of fundraising are usually in the works, according to the report.

The report, which surveyed 200 executives who were involved in M&As the last two years, showed that the majority of respondents expected an increase in M&A appetite this year.

Participants were most optimistic about Asia, as they expect M&A activity in the region to increase. This was followed by the United States and Canada.

“It’s excellent to see some optimism return to the market after what has been the longest period of ongoing decline in M&A in recent records,” said Raj Karia, NRF’s EMEA Head of Corporate, M&A and Securities.

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In addition, over 56 per cent of respondents said that they believe the US will be one of the countries to see the highest growth in inbound cross-border M&A activity this year as compared to last year. India and the United Kingdom ranked second and third in terms of expectations on deal volumes in 2023.

By sector, most respondents were bullish on technology being among the top three sectors which they expected would see the highest growth in inbound cross-border M&A in 2023. This was followed by life sciences and healthcare, as well as business services.

However, challenges remain. Financing costs will remain high for most prospective dealmakers, with those in Europe and the Middle East expected to be most impacted, said the report’s authors.

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Notably, antitrust regulations are seen as a significant obstacle to all regions globally – most pertinently in Asia (64 per cent), followed by the US and Canada (50 per cent each).

Foreign direct investment regulations are also expected to pose the biggest regulatory challenge in developing economies.

In addition, the use of representations and warranties insurance is predicted to rise, especially within the technology sector.

“Despite the ongoing challenges that have been identified across many regions, there is definitely a sense of renewed enthusiasm for dealmaking and it’s interesting to see technology and life sciences and healthcare highlighted as key potential sectors for activity in the coming months,” said Karia.