Posted by Mumbai- London: GLobal deal market continues to remain under the tight grip of macroeconomic uncertainty this year so far, although the world has been totally free from the aftermath of the deadly China-origin COVID-19 virus a year ago. The global deal market activity during the first seven months of 2023 remained sluggish with a 23.6% year-on-year slump, according to GlobalData, a UK-based data and analytics company.
Macroeconomic Uncertainty
Macroeconomic uncertainty continued to overshadow the first seven months of this year, impacting the global deal activity (mergers & acquisitions (M&A), private equity (PE) and venture financing), with firms contending with the ripple effects of escalating interest rates and an ambiguous economic horizon.
The uncertainty has been of a compounding nature with no respite from other global factors such as the Russia-Ukraine war, which has been ongoing for the past 18 months now. The impact of war has already cast its shadow on the global crude oil market leaving economies around the world suffering from high inflation, recession unstable currency and growing unemployment
Deal volume
GlobalData’s stats are based on an analysis of its Financial Deals Database, which revealed that deal volume decreased from 42,504 to 32,460. The number of M&A, PE and venture financing deals declined by 16.9%, 25.8% and 31.8%, respectively, from January to July 2023 compared to the same period the previous year.
“The course of deal activity has been through a rough phase so far in 2023 driven by economic uncertainty, recession concerns, and geopolitical tensions. This downturn extends across various regions and resonates within pivotal markets, indicating a prevailing and far-reaching pattern,” said Aurojyoti Bose, GlobalData’s Lead Analyst.
Deals landscape
North America continued to dominate the deals landscape even though the region witnessed a 27.4% Y-o-Y decline in deal volume during January-July 2023.
Europe, Asia-Pacific, Middle East and Africa and South and Central America regions also witnessed a decline in deal volume by 20.1%, 20.4%, 25.5% and 28.5%, respectively, during the period.
For instance, UK venture capital funding value plunged 54.3% during January-July 2023, according to GlobalData. A total of 808 venture capital (VC) funding deals worth $8 billion were announced in the UK during the period this year.
However both VC funding deals volume and value witnessed considerable year-on-year declines of 28.4% and 54.3%, respectively, the data and analytics company said.
APAC
The Asia-Pacific (APAC) region saw a 20.4% year-on-year decline in deals (mergers & acquisitions (M&A), private equity (PE), and venture financing), mirroring global trends.
Economic uncertainty and geopolitical undercurrents have woven a fabric of sluggishness and de-growth, with key markets such as China, India, and Japan experiencing setbacks, GlobalData said.
An analysis of GlobalData’s Financial Deals Database reveals that 8,457 deals were announced during January – July 2023 compared to 10,626 during the same period in 2022.
All the deal types under coverage witnessed a Y-o-Y decline in deal volume. The number of M&A, PE and venture financing deals announced in the region declined by 10.9%, 7.8% and 28.7%, respectively, during January-July 2023.
“Mirroring the global trends, the Asia-Pacific region’s deal landscape paints a subdued picture. As economic uncertainties interlace with geopolitical currents, key markets including China, India, and Japan grapple with setbacks, vividly illustrating the intricate interplay of economic drivers and regional complexities,” commented Bose.
China, which is the top APAC market by deal volume, witnessed a 13.3% drop in deal volume from 3,215 during January – July 2022 to 2,787 during the same period this year.
Several other APAC markets also suffered setbacks in deal activity. For instance, India, Japan, Australia, South Korea, Singapore, Hong Kong, Indonesia and New Zealand witnessed respective deal volume declines of 30.9%, 14.8%, 21.2%, 31.9%, 22.9%, 19.8%, 40.4% and 23.4%.
“As businesses and investors navigate and recalibrate amidst the economic complexities and geopolitical dynamics, the path ahead demands a nuanced understanding of these intricacies for a more resilient future,” added Bose.
“This challenging phase underscores the complexities of navigating a evolving landscape while also testing the enduring capacity of industries to adapt and seek avenues of revival,” concluded Bose.
Based on what the global deal market has seen in the first seven months, it is highly unlikely that there could be a drastic improvement in the late part of this year.