Global M&A braces for dry spell as boardrooms put expansion on hold

Global M&A braces for dry spell as boardrooms put expansion on hold

Global dealmaking is entering an arid season as raging inflation and a stock market rout curb the thirst of many corporate boards to expand through acquisitions.

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Russia's invasion of Ukraine in February and fears that an economic recession is looming dealt a blow to merger and acquisition (M&A) activity in the second quarter.

The value of announced deals dropped 25.5 per cent year-on-year to $1 trillion, according to Dealogic data.

"Companies are standing back from M&A in the short-term as they are more focused on the impact of a recession on their business. The timing for dealmaking will come but I don't think it's quite there yet," said Alison Harding-Jones, Citigroup Inc's EMEA M&A head.

M&A activity in the United States plunged 40 per cent to $456 billion in the second quarter, while Asia Pacific was down 10 per cent, Dealogic data showed.

Europe was the only region where dealmaking didn't crash. Activity was up 6.5 per cent in the quarter, largely driven by a frenzy of private equity deals, including a 58 billion euro takeover bid for Italian infrastructure group Atlantia.

"We are nervous about the back half of the year but transactions are still happening," said Mark Shafir, global co-head of M&A at Citigroup.