Pockets of resilience in a turbulent sea

It has been a gloomy few months for M&A in the Americas, to say the least. Compared to the bright uplands of the immediate post-pandemic era, Q1 of this year more closely resembles a brackish quagmire.

Inflation, once thought to be transitory, grew persistent.

With few alternatives at their disposal, monetary policymakers pursued an agenda of aggressive interest rate increases in a bid to bring price rises back to target. Financing conditions grew tighter and tighter, public markets took a turn for the worse, and M&A activity tumbled.

The economic outlook in the near and medium term doesn’t leave too much room for optimism. The US recorded GDP growth of 2.1% in 2022, according to the most recent figures published by the International Monetary Fund (IMF), with that expected to decelerate to 1.6% in 2023 and just 1.1% next year. Latin America & the Caribbean, for its part, is forecast to fare slightly better—GDP growth is expected to decline from 4% last year to 1.6%, before climbing again to 2.2% in 2024.

Looking up

The broad outlook is downbeat, but there are signs of resilience amid the discouraging headlines. Some M&A markets were able to avoid the downturn in both deal volume and aggregate value, those being the Western US and Southern US subregions.

A handful of big-ticket transactions came to fruition as well. Pfizer’s US$45.7bn acquisition of biotech company Seagen, for instance, was the largest deal announced in the pharma, medical & biotech (PMB) sector since 2019’s AbbVie-Allergan tie-up.

On the policy side, too, one can find signs of improvement. In March, US inflation fell to 5% year-on-year, a significant deceleration from the 6% recorded in February. Central bankers at the Federal Reserve refuse to become complacent, but many onlookers believe that just one more rate rise will be forthcoming before policymakers look to start cutting rates towards the end of this year.

Published in association with Datasite, Deal Drivers Americas provides an in-depth review of M&A activity in 2023, as well as an outlook for the year ahead.

The report is also available on datasite.com.