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M&A activity remains resilient in 2022, but further shocks could derail outlook

Despite major geopolitical and financial headwinds, global M&A activity in H1 2022 has been resilient, according to analysis of M&A data by EY.

With 2,274 deals of a total value of $2.02 trillion, M&A in H1 2022 may have seen a drop compared to this time last year (down 27% by value and 18% by volume), but activity is up compared to the average of the last M&A cycle (up 35% and 13% respectively).
According to analysis by EY, the nature of cross-border deals is changing to reflect geopolitical tensions on the world stage. While cross-border transactions levels in H1 have decreased (24% in 2022 vs an average of 30% over 2015-19), the share of cross-border deals among closely affiliated countries has increased (51% in 2022 compared to an average of 42% over 2015-19). The analysis finds that investment from China into the US has fallen from $27bn at the highpoint in H1 2016 to $1.9bn, while North American investment into Europe have increased from $60 billion to $149 billion over the same period.

Following the US ($900bn) and China ($175bn), which traditionally top the table of most active M&A markets, India has had an extremely active start to the year with the combined value of its outbound, inbound and domestic deals jumping to $128 billion an increase of 215% compared to the average of the last deal cycle (2015-19). According to EY analysis, as well as a burst of domestic M&A ($107bn vs an average of $21.5bn over 2015-19), H1 2022 also saw an increase of Indian-owned companies buying foreign-owned assets ($6.2bn vs $2.3bn over the average of the last deal cycle (2015-19).
Looking at sector performance, once again Technology drove global M&A in H1 2022. While the $627bn of M&A activity was down 20% from the record 2021 levels ($789bn), it still accounted for nearly a third (31%) of global M&A activity. Deals focused on technology targets are now at double the level of the previous cycle (up 95% against the 2015-19 average of $322bn). Conversely, the EY analysis finds that the Life Sciences sector continues to underperform, despite the recent health crisis. The sector has recorded $111bn in deals so far in 2022 (down 58% year-on-year and 48% versus the 2015-19 average). The Consumer sector that has traditionally been an active M&A market has also seen a 27% decline in activity compared to H1 2021, down to $91bn.

Despite the widespread uncertainty, a fragile global economy and increased regulatory intervention, M&A is continuing apace, with a particularly strong flow of private capital driving activity. Even though capital market conditions have tightened sharply through the first half of 2022, private equity (PE) firms still have large amounts of cash that will need to be deployed in the latter half of the year.

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