TLDR:
– M&A activity in North America dropped by 30.4% in Q2 2023 compared to the same time last year.
– The number of U.S blank check companies going public in Q2 2023 was the lowest in four years.
Well, folks, it seems we’ve hit some financial turbulence. Who would have thought that the revered M&A market in North America would be stumbling? The number crunchers at S&P Global Market Intelligence have totted up the numbers and it seems the trades in the good old U.S. and Canada have dropped by a whopping 30.4% in the second quarter of 2023 compared to the same time last year. Hard to imagine, isn’t it?
Even more startling is the dramatic drop in M&A deal value for banks in the first half of 2023. It plummeted from a heady $3.5 billion to a mere $617.8 million. Talk about downsizing your ambitions! Just to rub salt in the wound, transaction activity between credit unions and banks has been slower than a snail on a treadmill this year, with only four deals announced compared to a record-breaking 16 in 2022.
But hey, it’s not all doom and gloom. The white knights of the financial market, the investors and private equity deals, have swooped in to save the day, accounting for a large chunk of bank M&A activity during this trading slump. And let’s not forget the unsung heroes, the pension funds who have been actively participating in numerous mergers and acquisitions. They seem to be just about keeping their heads above water, showing a flat to slightly improved performance in 2023 compared to a year earlier.
On another note, the number of U.S blank check companies going public in the second quarter was just four. That’s the lowest in four years! High interest rates and the expectations of further rate hikes in July have put a damper on the IPO party for Special Acquisition Companies (SPACs). They are just not able to raise the cash they need to acquire other businesses. The disclosed value of SPAC M&A for the second quarter was a mere $890 million, a far cry from the $2.14 billion value of deals in the same quarter of 2022.
But there’s a silver lining in every dark cloud, they say. And in this case, it’s the U.S. corporations that have rolled up their sleeves and cut costs in response to the rising interest rates and a weakening economy. In the first quarter of the year, operating expenses for companies rated investment grade by S&P Global Ratings fell 5.3% to a total of $2.858 trillion. Even the companies with weaker balance sheets got into the act, trimming costs by 3.8% from the fourth quarter of 2022 to $628.71 billion. Now that’s what I call resilience!
In conclusion, dear friends, we must remember that every cloud has a silver lining. Despite the dip in the M&A activity and the troubles facing SPACs, the future is not all bleak. With inflation slowing and interest rate hikes all set to end, better days are ahead. And remember, the measure of a company’s strength is not how well it performs in good times, but how it weathers the storm. So, let’s face the challenges head-on and seize the opportunities that lie ahead. After all, we’re all in this together!