Transaction heroes: How CFOs can position their companies for a possible M&A revival

Introduction

Any discussion of the current M&A landscape might start with a simple observation: In stark contrast to recent years, very little dealmaking appears to be happening out there.

Following a record performance in 2021, global M&A activity stalled in 2022, which caused deal volume to slump.¹ It hasn’t picked up since, a fact that’s hardly surprising given that the economic factors that triggered the slump have not gone away. Indeed, any possible resurgence in the M&A market in the near term would have to come despite several drags on dealmaking. Borrowing costs remain well above rates from a few years back. A possible recession looms. Regulatory scrutiny of proposed M&A transactions—especially those involving large tech companies and other data-rich entities—has increased. Moreover, many nonfinancial services companies have been draining their cash reserves of late, mostly on share buybacks or dividend hikes.²

However, mergers and acquisitions could remain essential for growth in many industries. Despite the current headwinds, deals in those sectors will likely get done by buyers with plenty of dry powder or access to nondebt financing. And CXOs at some businesses may see silver linings in the current uncertain environment and could pounce on openings created by industry disruptions. The lull in the acquisition action also generally provides companies time to lay the groundwork for future deals.

In Deloitte’s ninth annual 2023 M&A Trends Survey, more than 90% of corporate respondents and those representing private equity (PE) firms say they believe that M&A outcomes depend highly on effective transformation planning and execution, likely reflecting their awareness of the challenging environment.³ The survey drew responses from 1,400 US-based senior corporate and private equity firm executives and found that innovation has a significant role in current and future transactions and transformations.⁴

In this edition of CFO Insights, we’ll explore how CFOs can adapt to the current M&A environment—and prepare for the shape of the potential M&A market to come. Where could affordable financing come from? What geographies will likely be most appealing—and why? How might deal structure change? And what can companies do to better position themselves for success when dealmaking ramps up?

Endnotes

¹ Based on Deloitte’s analysis of M&A data generated via the Refinitiv database on January 9, 2023. Figures are based on the announcement date.

² “Moody’s: Cash pile for U.S. non-finance companies declines 7% to $2.0 trillion as capex, other spending, reach record highs,” press release, July 21, 2022.

³ “2023 M&A Trends Survey: Navigating Uncertainty,” Deloitte Development LLC, 2023.

⁴ Ibid.

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