M&A appetite returning despite concern over regulatory risks

Appetite for M&A looks set to rebound this year despite fears over stricter regulations, with more firms likely to turn to representations & warranties (R&W) or warranty & indemnity (W&I) insurance to cover key risks, finds a survey by Norton Rose Fulbright. The company’s first ever Global M&A Trends and Risks Report surveyed 200 senior executives from leading corporations and financial institutions across the world and found that 56% think their appetite for M&A will increase this year. Just 17% say their appetite will decrease. This suggests there will be a rebound in M&A after Q1 2023 saw M&A volumes slide for the fourth consecutive quarter. This is now the longest succession of quarterly declines on recent record. Executives are most upbeat in Asia, where 64% expect M&A to increase, followed by the US and Canada on 60%. Just under half of respondents (49%) said they expect M&A to increase in Europe and the Middle East. The figure stands at 32% in Australia and 29% in Africa. Some 56% of respondents think the US will see among the highest growth in inbound cross-border M&A activity in this year over 2022, followed by India on 39% and the UK on 38%. Technology ranked as the sector likely to see the most M&A on 63%, followed by life sciences and healthcare on 52% and business services on 45%. The survey finds that stricter foreign direct investment regulations are seen as the biggest risk to wrapping up M&A’s in Europe, the Middle East and North America. And participants expect the use of R&W/W&I insurance to increase, especially within the technology sector. “Obstacles abound on the road to successful M&A in the near term, but none are insurmountable. Besides local risk when conducting cross-border transactions, stricter regulatory environments and inflation are weighing heavily on dealmakers’ minds, though they are finding some solace, at least, in employing R&W insurance more frequently,” says Norton Rose Fulbright. “The use of representations & warranties (R&W) or warranty & indemnity (W&I) insurance has grown rapidly in recent years, and respondents expect it to increase in all markets in 2023. The most noticeable jumps are expected to come in Asia (58% forecast a significant increase) and Africa (57%). Both Asia and Africa are relative newcomers to R&W/W&I insurance, and the scope for growth there is therefore significant as dealmakers race to mitigate risk,” it adds. The survey finds that private equity dry powder is expected to rank among the top three drivers of M&A activity this year. Meanwhile, financing costs continue to be high for most prospective dealmakers, with those in Europe and the Middle East expected to be impacted the most. Raj Karia, Norton Rose Fulbright’s EMEA head of corporate, M&A and securities, said: “It’s excellent to see some optimism return to the market after what has been the longest period of ongoing decline in M&A in recent records. Despite the ongoing challenges that have been identified across many regions, there is definitely a sense of renewed enthusiasm for deal making, and it’s interesting to see technology and life sciences and healthcare highlighted as key potential sectors for activity in the coming months.” Survey respondents included 100 top-level executives from multinational corporations, as well as 50 from large private equity firms and 50 from major investment banks. Respondents had all participated in M&A across multiple regions and sectors over the past two years.

M&A appetite returning despite concern over regulatory risks

Want to read this article?

Read Next

Swedish risk managers told to focus on flexibility rather than resilience

European Parliament votes for ‘hard-fought compromise’ on CSDDD

Rates fall in most regions during Q1 but rise in Europe and US: Marsh

Major cyberattack would hike rates but insurers would ‘brush off’ losses: Lockton Re

Chubb says Q1 saw ‘best rates’ as it books $2bn profit

Swedish risk managers told to focus on flexibility rather than resilience

European Parliament votes for ‘hard-fought compromise’ on CSDDD

Rates fall in most regions during Q1 but rise in Europe and US: Marsh

Major cyberattack would hike rates but insurers would ‘brush off’ losses: Lockton Re

Chubb says Q1 saw ‘best rates’ as it books $2bn profit

Want to read this article?

Read Next

Swedish risk managers told to focus on flexibility rather than resilience

European Parliament votes for ‘hard-fought compromise’ on CSDDD

Rates fall in most regions during Q1 but rise in Europe and US: Marsh

Major cyberattack would hike rates but insurers would ‘brush off’ losses: Lockton Re

Chubb says Q1 saw ‘best rates’ as it books $2bn profit

Related Articles