Shrunken Global M&A Market... $3 Trillion Broken After 10 Years

Market Sentiment Frozen by Regulation, Interest Rate Hikes, and Middle East Conflict
ExxonMobil Down 17% Compared to Last Year Despite $60 Billion Big Deal

Due to the impact of interest rate hikes by major countries including the United States and escalating geopolitical tensions in the Middle East, the global mergers and acquisitions (M&A) transaction volume this year fell below $3 trillion (approximately 3,866 trillion KRW) for the first time in 10 years.

According to analysis by the London Stock Exchange Group on the 28th (local time), the total transaction amount in the global M&A market this year was about $2.9 trillion (approximately 3,737 trillion KRW). This represents a 17% decrease compared to last year.

[Image source=AFP Yonhap News]

This is the first time since the Eurozone crisis in 2013 that global M&A transaction volume has dropped below $3 trillion. Simona Maellare, Co-Head of the Alternative Capital Group at global investment bank UBS, stated, "Looking at the transaction volume, the market in 2023 was much more sluggish than expected."

The region with the largest decline in transactions was Europe, shrinking by 28% compared to a year ago. During the same period, the Asia-Pacific region decreased by 25%. The United States saw only a 6% decline, influenced by large-scale M&A deals such as Japan's Shin Nippon Steel acquiring US Steel for $14.9 billion (approximately 19 trillion KRW).

The M&A market had been on a steady decline due to the impact of COVID-19. Additionally, strong regulatory policies by competition authorities worldwide and the sharp rise in global interest rates have frozen the private equity market itself.

The largest deal in the global M&A market this year came from the energy sector. ExxonMobil, the largest energy company in the United States, agreed to acquire shale oil drilling company Pioneer Natural Resources for $60 billion (approximately 77 trillion KRW). Oil giant Chevron also closed a big deal by acquiring crude oil exploration and production company Hess for $53 billion (approximately 68 trillion KRW). In addition, in the pharmaceutical and biotech sector, global pharmaceutical company Pfizer agreed to acquire cancer treatment manufacturer Seegene for $43 billion (approximately 55 trillion KRW). These big deals were concentrated in the fourth quarter, resulting in a 28% increase in transaction volume compared to the third quarter.

Although the global M&A market appeared to be recovering with successive big deals, it began to freeze again after the war between Israel and the Palestinian militant group Hamas started in October. While the total transaction volume increased in the fourth quarter due to large-scale M&A deals, contracts under $500 million (approximately 64.35 billion KRW), which make up the majority of M&A, decreased by 27% in terms of value and by 6% in terms of the number of deals. Mark Sorell, Co-Head of Global M&A at Goldman Sachs, said, "The regulatory environment was tough throughout the year," adding, "As market sentiment improved, conflicts broke out in the Middle East."

Due to high interest rates and inflation, companies also faced difficulties finding investors. Canadian asset management firm Brookfield postponed plans to sell resort company Center Parcs for over ?4 billion (approximately 6.556 trillion KRW).

There were also cases where companies abandoned acquisitions due to intervention by competition authorities. Adobe, famous for 'Photoshop,' attempted to merge with design software company Figma for $20 billion (approximately 26 trillion KRW), but withdrew the acquisition after the European Union (EU) and UK competition authorities concluded that the merger would hinder market competition. Microsoft's $75 billion (approximately 97 trillion KRW) acquisition of Activision Blizzard faced multiple obstacles and was approved after 21 months.

Experts predict that the long-dormant M&A market will become active in the second half of next year. The US online media Axios reported, "A slowdown in the M&A market can place a burden on companies seeking growth or investment."

This content was produced with the assistance of AI translation services.