New Report Looks at Drivers of M&A Activity

Norton Rose Fulbright has published a report looking at M&A activity in the insurance sector. Overall, the mood is upbeat, despite the rising cost of funding for investors, as cheap money supply tails away. Demand for innovative companies remains strong and if you can prove your concept works, then you’ll find plenty of interest. Here are some extracts and stats from the report, which surveyed 200 C level people in Mergers, Investment, private equity etc.

“There are signs that inflationary pressures are beginning to ease, at least in developed markets, thanks in great part to retreating energy prices. Consequently, the cycle of central bank interest rate hikes is expected to level off, and perhaps even begin to reverse, towards the end of the year.

While dealmakers remain wary of threats lurking in the immediate economic environment – not least in the banking sector – expectations of an uptick in M&A activity are mounting. “In global markets, deal appetite will increase considerably in the second half of 2023,” predicts the managing director of a US investment bank. Others also expect to see notable M&A growth in H2: “By midyear, dealmakers will start considering more cross-border deals to diversify their holdings,” says a partner of a UK buyout firm.

Green shoots of recovery are already appearing. The private equity space, for example, saw deal volume jump 15 percent quarter on quarter in Q1 2023 with a total of 1,769 transactions – the third-highest Q1 deal count according to records going back to 2006.”

KEY STATS

Some 62% of those surveyed thought that their clients would be net buyers this year, rather than sellers. Meanwhile 59% saw international PE buyers as being the drivers of M&A deals this year. Over half of the respondents thought that Asia would see most M&A activity this year, with the US and Canada in second place at 47%.

The tech sector, followed by Life Sciences were the most favoured areas for investment this coming year.

Interestingly, some 48% said that digital transformation was the primary reason for a merger, or company buy out. That tends to suggest that some medium sized businesses simply cannot re-purpose their IT operations without a significant chunk of cash being injected.

54% of those surveyed saw a distressed company being a key opportunity too.

Of those who did go down the digital transformation route, the top sector as regards benefits from that process were rated as financial institutions – including insurance. Some 76% saw financial brands as being the key recipients of digital makeovers and mergers – top answer.

More details in the report here.