Dealmakers expect M&A to soften in 2023 due to higher financing costs

Mergers and acquisitions activity in Ireland is set to stagnate or decline as tougher financing conditions impact both values and volume, according to KPMG.

ut the change has tipped the balance in favour of buyers after years of seller-driven activity, the advisory firm said in its 2023 M&A Outlook.

Of the 150 business leaders surveyed by KPMG, 84pc thought deal volumes would either be flat or fall this year because of market uncertainty.

Nearly three-quarters said that multiples paid for companies would soften, after a period of record activity, setting up a buyers’ market.

For that reason, three in four also said they would be hunting for opportunistic M&A deals to take advantage of lower valuations to spur inorganic growth.

“In spite of economic uncertainty, there is plenty of opportunity for M&A activity in 2023 as market multiples soften,” said Mark Collins, head of deal advisory at KPMG Ireland.

“High quality Irish targets continue to be of interest to both international and Irish investors. Particularly given the macroenvironment, diligence in all its forms will be essential to validating investment returns.”

KPMG said select sectors such as healthcare and financial services still offered good opportunities for sellers, however, especially companies with resilient business models and high-performing management teams.

The firm said private equity was sitting on a lot of “dry powder” while flush corporate buyers had strong balance sheets.

But unlike in recent years, respondents said buyers were now less willing to take on high debt loads to fund transactions due to higher financing costs.

Slightly more than half of survey participants said availability of debt and cost of funding would be the main obstacle to deal activity this year. Another four in 10 said that inflation was a major concern, too, suggesting that economic trends are creating caution.

Deal data from Refinitiv showed Irish M&A slowed considerably in 2022. While the number of transactions was relatively stable, values plummeted during the year.


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