This past year has been a bit different from the prior year for M&A. After a record year in 2021, EMEA M&A has seen a downshift in momentum. Both deal volumes and values in EMEA fell in the first three quarters of 2022 compared to the same time last year: there were 8,279 deals worth €844.9bn, a 14% drop yoy in terms of deal volume and a 16% decline in deal value (see Deal Drivers: EMEA Q3 2022).

No region has really been immune from the impact of factors including rising inflation and interest rates, the war in Ukraine, ongoing supply chain issues, rising energy prices, fluctuating exchange rates, and changes in consumer behavior. And the effects have been seen in dealmaking.

“This past year, sell-side processes on Datasite have been taking longer to complete versus the prior year, as dealmakers spend more time preparing deals and conducting due diligence, in the midst of choppier market conditions, rising interest rates, supply chain challenges and decreased demand in some cross-border deals,” said Merlin Piscetelli, chief revenue officer for Europe, the Middle East, and Africa.

However, that doesn’t mean all is doom and gloom as we look ahead to 2023. “Despite the disruption and risk, market leaders continue to deploy M&A strategies even during these volatile times,” added Piscitelli.

Indeed, only 10% of dealmakers at a recent webinar said they expected the 2023 outlook for M&A in Europe to be negative.

So, what is this optimism, or at least tempered enthusiasm, due to?

This past year has been a bit different from the prior year for M&A. After a record year in 2021, EMEA M&A has seen a downshift in momentum. Both deal volumes and values in EMEA fell in the first three quarters of 2022 compared to the same time last year: there were 8,279 deals worth €844.9bn, a 14% drop yoy in terms of deal volume and a 16% decline in deal value.

No region has really been immune from the impact of factors including rising inflation and interest rates, the war in Ukraine, ongoing supply chain issues, rising energy prices, fluctuating exchange rates, and changes in consumer behavior. And the effects have been seen in dealmaking.

“This past year, sell-side processes on Datasite have been taking longer to complete versus the prior year, as dealmakers spend more time preparing deals and conducting due diligence, in the midst of choppier market conditions, rising interest rates, supply chain challenges and decreased demand in some cross-border deals,” said Merlin Piscetelli, chief revenue officer for Europe, the Middle East, and Africa.

However, that doesn’t mean all is doom and gloom as we look ahead to 2023. “Despite the disruption and risk, market leaders continue to deploy M&A strategies even during these volatile times,” added Piscitelli.

Indeed, only 10% of dealmakers at a recent webinar said they expected the 2023 outlook for M&A in Europe to be negative.

So, what is this optimism, or at least tempered enthusiasm, due to?

Pipeline shows potential
First, there appears to be a healthy pipeline of potential deals out there – in both sectors and regions. Datasite is seeing a 10% increase in deals launching and preparing on its platforms year-to-date, demonstrating a difference between what has been announced and what will be announced in the future. And between June 1 and November 25, 2022, there were 3,022 stories about companies coming to market in EMEA per Mergermarket data — more than in 2021 at this time.

Sectors and sub-regions
TMT, consumer, and industrials & chemicals are expected to experience the most dealmaking this year – not much of a surprise, as those sectors have been in the top five for M&A deals by volume and value across all of EMEA in 2022.

The UK & Ireland and DACH could see a high level of deals (again, no surprise), but it might be worth keeping your eye on CEE & SEE, and Turkey, the Middle East & Africa, too, especially in TMT.

Forces at play
It also looks like valuations, cost of financing, and ESG will also play a big role in driving deals in EMEA in 2023. And remember, private equity still has over $1 trillion to play with – so things could well get even more interesting sooner than later.

Pipeline shows potential
First, there appears to be a healthy pipeline of potential deals out there – in both sectors and regions. Datasite is seeing a 10% increase in deals launching and preparing on its platforms year-to-date, demonstrating a difference between what has been announced and what will be announced in the future. And between June 1 and November 25, 2022, there were 3,022 stories about companies coming to market in EMEA per Mergermarket data — more than in 2021 at this time.

Sectors and sub-regions
TMT, consumer, and industrials & chemicals are expected to experience the most dealmaking this year – not much of a surprise, as those sectors have been in the top five for M&A deals by volume and value across all of EMEA in 2022.

The UK & Ireland and DACH could see a high level of deals (again, no surprise), but it might be worth keeping your eye on CEE & SEE, and Turkey, the Middle East & Africa, too, especially in TMT.

Forces at play
It also looks like valuations, cost of financing, and ESG will also play a big role in driving deals in EMEA in 2023. And remember, private equity still has over $1 trillion to play with – so things could well get even more interesting sooner than later.