Will M&A Deal Flow Hold Steady in Q2 2023?

After a challenging end to 2022 that was defined by macroeconomic headwinds and uncertainty, most market observers and dealmakers entered 2023 with cautious optimism about the state of the landscape for mergers and acquisitions (M&A).

Our latest M&A market prediction featured in the Q2 2023 SS&C Intralinks Deal Flow Predictor validates these sentiments. Since the early-stage deals that use our virtual data rooms (VDRs) are typically six months from a public announcement, we can predict with great accuracy where the M&A market will go in the next quarter, helping dealmakers to identify potential opportunities. VDRs are employed by advisors, corporates and private equity firms alike for performing due diligence on prospective dealings such as asset sales, divestitures, private placements, financings, capital raises, joint ventures and partnerships.  

Continued holding pattern for Q2 2023

Given the impact of Russia’s invasion of Ukraine, supply-chain disruption and the end of a COVID-19-driven dealmaking surge at the start of 2022, it’s no surprise that our data indicates year-over-year M&A growth for Q2 2023 globally. On a quarter-over-quarter basis, however, we expect deal volume across most regions to remain neutral with potential for negative movement.

North America may well dip below the negative end of our neutral outlook in Q2 2023, with possible further downside risks. After a strong September that provided material uplift to Q3 2022, it’s not shocking to see a potentially negative trend in M&A activity — especially given stress in the U.S. banking sector and uncertainty about ongoing interest rate hikes.

The hope that rate hikes will come to an end by the second half of 2023 gives cause for optimism. However, for Q2 2023, we anticipate a neutral to negative trend.  

Opposing trends for IPO and restructuring markets

As we come off a year that saw relatively fewer initial public offerings (IPOs), it will still take time to return to the peak levels of previous years. Although the headwinds haven’t passed, the positive trend in our pipeline indicates a willingness to test the markets. Since 2022’s sharp drop in IPOs was preceded by a record 2021, listing activity is still relatively high.

The same headwinds that have been pressuring M&A and IPO activity may signal an opposite trend in the restructuring industry, particularly in North America and Europe, the Middle East and Africa (EMEA). Bankruptcy filings picked up in the second half of 2022. We expect this to continue in a challenging environment marked by recent bank collapses, higher borrowing costs and reduced market liquidity.  

What’s next?

Will more acquirers look to position themselves for inorganic growth coming out of the recent downturn? As the year progresses, it will be interesting to see where and when the pace of dealmaking will accelerate.  

For a full M&A market prediction by sector and region, you can access the Q2 2023 SS&C Intralinks Deal Flow Predictor here.