After 2021, a particularly exceptional year for the M&A market, 2022 promises to be a more mixed year. Globally, the number and volume of large transactions are falling sharply. While the French market has not escaped the global downturn, some deal types are holding up well. Experts at AURIS Finance, a mergers and acquisitions consultancy, take stock.
The figures are clear. After a particularly dynamic year in 2021, merger and acquisition activity is set to fall sharply in 2022. This slowdown follows a major post-covid recovery. Deals that had been stalled during the various confinements of 2020 were finalised during the following year. There has also been a change in mindset on the part of potential acquirers. In an uncertain economic climate (war in Ukraine, rising interest rates, etc.), companies and investment funds are taking a wait-and-see attitude, and transactions are taking longer to materialise. As a result, the first half of 2022 saw a worldwide contraction in transactions of 17% in volume and 22% in value.
France is not immune to the general downturn
In France, the trend is also towards a contraction. In the third quarter, M&A activity in France was down 35% year-on-year, while the number of transactions fell for the third consecutive quarter. According to Refinitiv, between 1 January and 10 June 2022, mergers and acquisitions in France fell by 42% to $37.5 billion. This level is still well above the $25 billion recorded in 2019. Again according to Refinitiv, M&A transactions involving French targets fell by 41% in the third quarter, while the value of private equity transactions fell by 17%.
However, some transactions are holding up well
Yet, these figures conceal major disparities. On the one hand, market numbers are still largely affected by the decline in mega deals involving large caps, i.e. companies valued at over €1 billion. For these transactions, buyers are becoming rarer, and a wait-and-see attitude prevails. Small and mid-caps, on the other hand, continue to attract buyers. For companies with attractive profiles, demand remains real. For all that, caution is the order of the day. More than ever, buyers are paying close attention to the valuation of the targets they are interested in. Indeed, valuation levels have fallen slightly in recent months, as shown by the mid-market Argos Index, which stands at 10 x Ebitda for the second quarter of 2022, down 14% year-on-year.
Correction in valuation levels
Against this backdrop, some companies are now less attractive than others. This is particularly the case for technology companies, whose valuations have come down to more reasonable levels after a particularly dynamic 2021, when they benefited from the acceleration of post-covid digitalisation.
Get the support you need
In today’s uncertain macroeconomic climate, buyers are very cautious when assessing their target. Due diligence periods are often extended so that all elements of the business can be scrutinised. More than ever, buyers and sellers need the support of experts who can get the due diligence right and ensure that transactions are part of a long-term strategic vision. Whether you are a selling company ,looking for a buyer or a candidate for an acquisition, AURIS Finance’s sector specialists are at your side.
