The value of global mergers and acquisitions fell 17% year-on-year to $2.1 trillion, according to data compiled by Bloomberg. It is understood thatUnder the combination of severe inflation, hawkish central banks, the conflict between Russia and Ukraine and a squeezed supply chain, the slowdown in mergers and acquisitions may not be temporary.It is understood that global M & A transactions reached a record level of 2.5 trillion US dollars in 2021.

In addition, banks have begun to reduce lending to large deals, cutting off financing for private equity firms that fuelled the market boom.M & A transactions are falling in all major regions and most industries, and more and more deals are coming to a complete standstill.

While bankers are also keen to point out that M & An activity is still well above the historical average, M & An activity tends to lag behind capital markets for months, where major stock indices once turned red and share sales are now at a nearly 20-year low. The hype surrounding special-purpose acquisitions (SPAC) has also disappeared, hampering another approach to mergers and acquisitions.

Meanwhile,In the coming months, the boards of many companies are unlikely to give priority to large-scale strategic acquisitions as they focus on preparing companies for a possible recession.Rising commodity costs are understood to have hit the level of global consumer spending, coupled with continued uncertainty about the measures taken by central banks to deal with inflation, further dampening share prices and market sentiment.

In response, Michael Santini, executive chairman of global banking at UBS, said: "the market will fluctuate in the second half of the year. Given that the Fed's rate hike cycle is likely to end in 2022, we are likely to establish a more active M & An and IPO market in 2023, when we will have more visibility into the economic outlook. "

It is worth pointing out,In addition to companies, private equity acquisitions are also cooling.As recently as May, spending by buy-out companies was on a year-on-year rise, but now they are suddenly finding it increasingly difficult to get the leveraged loans needed to complete big deals.

Walgreens-United Boots (WBA.US), for example, this week abandoned the sale of more than £5bn ($6.1 billion) of Boots drugstores, while RECKITT BENCKISER GROUP PLC (RBGPF.US) is considering shelving the sale of its $7 billion infant formula business.

It can be seen in these two cases.Due to the tight credit market, it is difficult for private equity acquirers to meet the high price expectations of sellers.

Of course, there are still some private equity bets in the market. This year, for example, Blackstone Group Inc teamed up with the Italian billionaire Benetton family to try to privatize highway operator Atlantia SpA; National Grid plc has agreed to sell 60 per cent of its £9.6 billion natural gas transmission business Bidding groups are also vying for a stake in Deutsche Telekom AG's 20 billion euro ($21 billion) radio tower business.

High-tech industry is still the first choice for mergers and acquisitions.

As shown in figure 2The technology industry accounts for 24% of global mergers and acquisitions and has completed the two biggest deals of the year.Microsoft Corp (MSFT.US) bought video game maker ATVI.US for $69 billion, and semiconductor company Broadcom Ltd bought cloud computing provider VMW.US for about $61 billion.

"companies still have record levels of cash, so they will be able to seize strategic opportunities at more attractive valuations," said Sameer Singh, Citigroup Inc's co-head of mergers and acquisitions in North America. Given the short-term volatility of the financing market, this is an opportunity moment relative to private equity. "

In addition, the deals between Microsoft Corp and Broadcom Ltd both mark the return of large deals worth more than $50bn, which were clearly absent from record deals in 2021. Also this year, HDFC Bank Ltd. Announced a $60 billion all-stock merger with the country's largest mortgage financier.

"some forward-looking management teams will still seek deals to move their strategy forward during the recession," said UBS's Santini.

Summary

Shown in figure 3Fears of a recession do depress the value of transactions in all major regions. On the other hand, pressure in the global market has also provided impetus for some companies to seek mergers and acquisitions.The need for companies to quickly adapt to changing consumption habits, relocate supply chains or accelerate the transition to cleaner energy will justify divestment, acquisitions and corporate restructuring.

"everyone is looking at a new world, considering challenges such as inflation, energy supply, the conflict between Russia and Ukraine and the economic slowdown, but they are not stopping the pace of development, but are shifting their focus to different types of deals," said Lutkens of BNP Paribas.

In recent months, Renault SA, the car group, has drawn up plans to separate its electric vehicles from internal combustion engines, GlaxoSmithKline PLC, the pharmaceutical company, has pushed ahead with plans to spin off its consumer health unit, and food giant K.US has said it will split into three companies.

Eric M. Swedenburg, partner and co-head of M & An of Simpson Thacher & Bartlett, saidThe trading market is not closed, just more cautious.