The external business environment has significantly challenged the M&A deal market over the last few years. However, despite the COVID-19 pandemic, inflation, and the war in Ukraine, M&A deal activity has remained strong. Since 2022, deal activity in the global M&A market has decreased by 18% but, overall, proven to be resilient. As the deal market is expected to restructure, in which markets will private equity (PE) firms find the most opportunities? And what is to come for 2023? Find out more below.

Adapting to the new way of doing business

PE professionals had to adjust their day-to-day activities to the consequences of the COVID-19 pandemic. Lockdowns forced PE firms to start new funds without any in-person contact leading to high-value deals being closed in these unusual circumstances. Regardless, PE professionals firms adapted to cope “new normal” in deal-making. 51% of dealmakers even believe that COVID-19 has driven market activity. At the beginning of 2022, 30% of all global controlling-stake M&A was performed by PEs. These totaled 3368 announced deals with a value of $476 billion. 

Where to find the buyout opportunities

PE firms will find unique opportunities in the technology, media and telecom (TMT) and industrial and chemical markets (I&C) sectors. The TMT market will hold a strong position when it comes to M&A opportunities at the end of 2022.  While most other industries were negatively affected by the COVID-19 pandemic, this sector has benefited from the pressures of digitalization as businesses in other sectors became dependent on reliable connectivity. Particularly, target companies for buyouts can be found in UK & Ireland, the CEE/SEE, and the middle east. 

Also, the industrial and chemical market will see a great number of buyout opportunities. While the I&C sector has experienced a 29% drop in deal volume to 742 transactions, the value of these transactions has remained stable at €79.9bn. The regions where the deal activity is predicted to be the highest are DACH and Italy. The I&C sector’s cyclic nature and current manufactural pressures will maintain long-term macro tailwinds stimulating M&A activity in this market.

What’s ahead?

While the global M&A market has been resilient in 2022, it remains questionable whether M&A activity can further sustain external impacts, especially, in consideration of the economic downtown. Still, M&A market optimism has been extremely high with a striking 73%, of dealmakers predicting 2023 will see similar levels of M&A volume. Particularly, PE firms have proven adaptable to external shocks and remain active in the search for new buyout opportunities. Naturally, some sectors will become less attractive while other unique opportunities will prevail. As predicted, high-value opportunities will be found in the middle market, which is less dependent on trends in the country’s GDP. The IT and tech-enabled services business will be of high interest. The large portion of recurring revenue and the dispersed market makes them ideal for a buy-and-build strategy. Additionally, following the previous trend, consumer industries including hospitality could continue to catch up to pre-pandemic levels.

With the great interest companies in these sectors are getting, It’s no question that private equity firms are consistently seeking better strategies and tools to streamline their deal origination process. Deal origination tools, like delphai, help PE firms optimize their outbound deal sourcing by finding high-value buyout targets. delphai enables them to monitor key signals and proactively source deals to get to them before their competition.

Curious to find unique opportunities in these sectors? Book your demo here