The state of the economy in the technology industry has greatly affected the M&A market. In times of uncertainty, companies are often more likely to engage in mergers and acquisitions (M&A) to gain market share or merge their position. One of the key drivers of this activity was economic uncertainty, as companies sought to bulk up to weather any potential storms. Low-interest rates and increased access to capital also played a role, making it easier for companies to finance deals.
The healthcare, technology and consumer sectors were active in M&A activity as companies looked to tap into growing markets. In 2023, the outlook for M&A activity will be favorable. They project the economy to continue to expand, although at a sluggish pace than in recent years.
M&A market overview
- Uncertainty fuels M&A activity: The current state of the economy has made for an uncertain business landscape. In times of uncertainty, companies look to merge to increase market share, eliminate competition and save costs. This has resulted in an uptick in mergers and acquisitions (M&A) activity.
- Megadeals drive M&A market: As the global economy continues to rebound from the Covid-19 pandemic, many experts predict that the M&A market will experience a boom in megadeals over the next few years. With corporations and private equity firms sitting on substantial amounts of cash and interest rates remaining at low levels, there will be much activity in the M&A market in the coming years. In the following few years, some of the targets for megadeals include technology, healthcare and energy companies.
Key drivers of M&A activity
- Economic uncertainty: As we move into 2023, much economic uncertainty is affecting M&A activity. This uncertainty comes from several factors, including the ongoing pandemic, trade tensions and political instability. This environment makes it difficult for companies to plan for the future, affecting their ability to make long-term strategic decisions about M&A.
- Interest rates: As we expect interest rates to rise, M&A deals in 2023 will be fascinating to watch. This could lead to a wave of consolidation in industries. It will be interesting to find out if companies will pay higher prices for acquisitions or if they will be more conservative with their capital.
- Access to capital: The availability of capital is a crucial driver of M&A activity, and we expect this to continue in 2023. Strong balance sheets and access to capital will help companies take advantage of opportunities. We hope to see increased M&A activity among large companies as they look to merge their position and increase market share. Middle-market companies will also be active as they look to grow through acquisition.
Key sectors for M&A activity
- Healthcare: The healthcare sector is expected to be one of the critical sectors for M&A activity in 2023. The combination of an aging population and advances in medical technology is driving demand for healthcare services, which is expected to continue over the next decade. Healthcare companies are also attractive targets for M&A activity because of the high market entry barrier. The healthcare sector is expected to continue to grow at a rapid pace, and this will create opportunities for companies to expand their businesses through M&A activity.
- Technology: As the world increasingly relies on technology, it is no surprise that the sector is expected to see increased M&A activity in 2022. With businesses looking to capitalize on the latest trends and technologies, we can expect much movement in the industry as companies look to consolidate their positions or enter new markets. This increased activity will bring about some great opportunities for investors, so it will be one to look at out for in the upcoming year.
- Consumer: With technological advancements and increased global competition, businesses expect the consumer sector to be dynamic in the M&A market in 2022. The consumer sector is consolidating as companies attempt to gain market share and economies of scale. As a cause, we are likely to see an expansion in M&A activity in this sector.
M&A market outlook
- Increased volatility: As economic and political uncertainty increases, the M&A market is expected to become more volatile in 2023. This is because companies are less likely to want to make significant investments during periods of uncertainty and are more likely to be more conservative with their budgets. This may lead to a reduction in the number of M&A deals that are completed, as well as the value of those deals.
- Deals will be larger: The average size of M&A deals should increase as companies consolidate to increase efficiency and scale. We expect the healthcare and technology sectors to see the most critical deals from ongoing consolidation in these industries.