Looks Like Global Deal Activity Has Fizzled Out

Looks Like Global Deal Activity Has Fizzled Out
Stéphane Renevier, CFA

5 months ago2 mins

What’s going on here?

Global deal activity has plummeted to a ten-year low.

What does this mean?

Barely any boardrooms have witnessed a firm negotiation and a handshake to match lately. In fact, only $2 trillion worth of merger and acquisition deals have been signed so far this year – the lowest total since 2013 and a 28% slip versus the same period in 2022, according to data from the London Stock Exchange Group. And sure, three multi-billion-dollar deals got the finance world talking in September, but a murky outlook and sky-scrapingly high financing costs mean you shouldn’t bank on many more following suit. Case in point: there were 42% fewer $10 billion-plus deals made in the first nine months of 2023 compared to the same period last year. That puts the total value of global deals on track to post a double-digit dip for two years in a row – a first since the 2008 financial crisis.

Why should I care?

For markets: It’s all too quiet.

Big banks make big money from advising on deals, so empty boardrooms aren’t a good sign for their books. Worldwide investment banking fees slipped 12% over the first nine months of this year versus the same period last year, with the third-quarter total hitting its lowest mark since the start of 2016. That’s an issue for the payroll, so major banks are set to slash over 11,000 roles this year.

The bigger picture: Climate, please change.

This slowdown in dealmaking is yet another sign that high interest rates are taking their toll on the economy. Rising rates have made it ridiculously expensive for companies to borrow the cash they need to fund acquisitions. And it’s been especially tough for private equity firms, which tend to be more aggressive and rely heavily on cheap financing to magnify their returns.

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