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NEW YORK (Reuters) – Mergers and acquisitions (M&A) activity fell to its lowest level in ten years globally in 2023, as high interest rates and an economic slowdown weighed on companies’ dealmaking confidence, but bankers and lawyers expect a pick-up as conditions improve.Total M&A volumes fell 18% to about $3 trillion, according to the most recent data from Dealogic, the lowest since 2013 when deal volumes were at $2.8 trillion. Dealmakers blamed high interest rates, which made it more expensive for private equity firms and companies with low credit ratings to raise acquisition financing. At the same time, economic uncertainty and market volatility made it harder for acquirers and sellers to agree on deal prices. “We were surprised by how difficult it was to bring deals forward in 2023. I think there will be an M&A rebound, but how much of it actually appears in 2024 and how much of it is a setup to 2025 remains to be seen,” said Paul J. Taubman, founder and CEO of boutique investment bank PJT Partners. M&A volumes in the United States – the world’s largest investment banking market – declined 8% to $1.42 trillion. Volumes in Europe and Asia Pacific declined more sharply, by 32%and 20% respectively. Private equity-led buyout volumes globally slumped 38% to $433.6 billion, as financial sponsors cut back on leveraged buyouts (LBOs) and sold fewer companies. “At its height, private equity accounted for roughly 30% of the deal activity, and over the last 12 months the sector has largely been absent from deal flow,” said Avinash Mehrotra, co-head of M&A for the Americas at Goldman Sachs. As a result, private equity firms have been distributing capital back to their limited partners at a much lower rate than in previous years, he said. “The deals got more complicated, transactions got harder to get across the finish line, and there was a bigger gap between buyer and seller value. And all those things in past downturns would have led to no discussions even happening. But what we’ve seen is a very healthy level of corporate dialogue,” said Tom Miles, head of Americas M&A at Morgan Stanley.
