What’s the current state of M&A in Europe? To get a correct view of the current state of M&A in Europe, it needs to be placed in the context of 2020 and 2021, as these were record years in terms of transactions. 2021 in particular was a recordshattering year in many aspects (deal value, fundraising etc). In 2021 there was a special alignment of factors which favoured exits: • Massive amounts of dry powder under pressure to be deployed • Buoyant public market resulting in the resurgence of IPO as exit (and consequently the rise of SPACs) • Better than expected economic growth (fuelled by state aids) and stock prices that reassured strategic acquirers • Cost of debt practically at zero The recovery of the M&A market since the early days of the pandemic was impressive. A collateral aspect of this was that the high deal values and volumes resulted in heightened regulatory interest in deal-making, meaning new challenges for deal planning and execution. As the war in Ukraine continues, sanctions on Russia, and related geopolitical volatilities have the potential to impact the M&A outlook, but the extent is hard to predict. However, one trend likely to continue is increasing regulatory complexity. 2022 brings other types of challenges and therefore we are waiting to see the impact of market volatility, increase of interest rates as well as geopolitical crises on transactions. So far, M&A in Europe has demonstrated a strong resilience. In Q1 2022, 4,138 deals closed worth in aggregate EUR 433.5 billion—marking YoY increases of 2.6% and 10.7%, respectively. The closing in February of the EUR 39.2 billion merger between S&P Global (NYSE: SPGI) and UK-based IHS Markit certainly impacted significantly overall deal value. Overall/globally, we are confident about 2022. However, given the tightening of economic conditions we expect that, contrary to 2021, 2022 will be more about medium and small size deals. We believe that in 2022, M&A players will be focused on deal value, portfolio optimisation, and looking for opportunities resulting from the cooling down of valuations. Looking forward, we expect that Tech and ESG will continue to attract valuation premiums especially when combined with attractive sectors such as health and infrastructure. What trends in fundraising are you seeing? While 2021 was a record year in terms of fundraising and there is plenty of ageing dry powder in the market, compared with Q2 2021, we see a decline in fundraising numbers by 50.5% by value and 57.8% by number of funds closed. Our analysis, and the figures, show that PE fundraising has taken a big hit this year due to the Fig 1.8: Private equity fundraising by fund manager location 250 200 150 100 50 0 200 180 160 140 120 100 80 60 40 20 0 No. of funds Aggregate capital raised (€bn) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 H1 2022 West Europe (Excl. UK) UK Nordic Central & East Europe Aggregate Source: Preqin Pro. Data as of July 2022 Bus i ne s s & Economy Finance Monthly. 18
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