2022 Mid-Year Update

M&A reset: As market headwinds pick up speed, the second half of 2022 is providing an opportunity for dealmakers to reassess strategy and act boldly.

What a difference six months makes. At the start of 2022, dealmakers were riding high from the best year on record for global M&A, with more than 60,000 publicly disclosed deals breaking US$5tn in value for the first time. PwC predicted that this year wasn’t likely to top 2021 in the face of growing headwinds—but the market expected M&A to continue to prosper. Fast-forward to mid-year. Not only have the headwinds grown stronger, but new ones have emerged, including rapidly accelerating inflation and interest rates, lower stock prices, and an energy crisis deepened by the Russia–Ukraine conflict. Despite these challenges, PwC believe that M&A will play an increasingly important role in corporate strategies—and there might even be better opportunities for investors to generate healthy returns in today’s environment, as valuations come down. Indeed, dealmakers have good reasons to reset their strategic priorities and make bold moves to get deals done in the areas of their M&A pipeline that matter most. Looking to the second half of the year, dealmakers are facing arguably one of—if not the—most uncertain and complex environments in recent memory. Deal values declined by 20% compared to the first half of 2021, and are likely to decrease further as the economic fallout is priced into global markets. Deal volumes have fared better, falling back to strong pre-pandemic levels, when M&A activity averaged 50,000 deals per year from 2017–19. But of particular note, the number of megadeals (deals with a value in excess of US$5bn) decreased by almost 40% between the second half of 2021 and the first half of 2022, as executives grew more cautious and regulatory scrutiny increased in several key markets.