Despite the geopolitical and financial difficulties, global M&A activity has recovered positively in the first 6 months of 2022.
According to Ernst & Young (EY), the market recorded 2,274 M&A deals, with a total value of 2.02 trillion USD, down 18% in deals and 27% in value compared to the same period in 2021.
However, compared to the previous period, the activity is still an up trend with an increase of 13% in terms of deals and 35% in value.
By industry, the technology sector once again led global M&A activity in the first six months of 2022. Although M&A activity in this sector was down 20% from a record in 2021 (789 billion USD), it still accounts for nearly a third of the total global M&A value.
Deals focused on technology companies are now more than double what they were in previous periods (95% increase from the 322 billion USD average between 2015-2019).
Meanwhile, M&A activity in the life sciences sector continues to be less active, despite the recent health crisis. The sector recorded 111 billion USD in M&A deals in the first half of 2022, down 58% year-on-year and 48% below the 2015-2019 average.
The consumer goods and retail sectors also saw a 27% decline compared to the first half of 2021, to 91 billion USD in value.
According to EY's analysis, the nature of cross-border M&A deals is changing to reflect the level of geopolitical tension around the world.
While the number of cross-border M&A transactions decreased to 24% in the first half of 2022 from 30% in 2015-2019, the number of cross-border deals between affiliated countries witnessed significant growth to 51% in 2022 compared to an average rate of 42% in 2015-2019.
EY's analysis also shows that investment from China into the US fell from a record 27 billion USD in the first half of 2016 to just 1.9 billion USD, while North American investment in Europe increased from 60 billion USD to 149 billion USD in the same period.
On a global scale, the need to conduct cross-border M&A transactions is still very large, but CEOs are becoming more and more cautious when choosing partners for deals.
They prioritized expanding their manufacturing operations and pursuing financial transactions within a lower cost margin, rather than pursuing a purely global expansion strategy.
EY Global Vice President Andrea Guerzoni affirmed that global M&A activity is continuing, fueled by particularly strong flows of private capital as PE funds still hold large amounts of cash that should be disbursed in the second half of 2022.
Mr. Guerzoni expects private capital to be the main driver of equity and debt transactions in the coming months because private capital is abundant while bank interest rates are high.
However, he also believes that barriers to the flow of M&A deals will appear if market conditions deteriorate. Such shocks could be widespread blockades, escalating geopolitical tensions, or an economic recession.
Regarding the Vietnamese market, Mr. Tran Vinh Du - leader of EY Indochina - said that investment activities from private equity funds and venture capital funds still grew strongly in the first half of 2022.
According to research by EY, despite the uncertainties in the capital and debt markets, the total transaction value in the first half of this year was almost equal to 2021, which was 4.97 billion USD.
However, the leader of EY Indochina believes that M&A activities will likely cool down in the second half of 2022 as investors are more cautious about macro trends that have an impact on the Vietnamese economy.
"It is also difficult for Vietnam to avoid negative effects when investment capital from developed countries into emerging markets declines, geopolitical tensions and high inflation. These are factors that weaken the confidence of investors in many markets, including Vietnam", Mr. Du informed.
In Vietnam, M&A activities in the technology sector have not been as expected, although this is still an area that attracts the attention of investors.
According to Mergermarket, there were only four technology-related M&A deals in the first half of 2022, compared with seven in the same period in 2021. Notably, the first 6 months of 2022 recorded a rather large deal.
For example, OnPoint, a provider of e-commerce solutions in Vietnam, announced successful fundraising of USD 50 million from a member investment fund of Temasek Holdings. The deal targets the rapidly growing e-commerce industry in Vietnam and is also the largest private funding deal in the field of e-commerce development in Southeast Asia over the past five years.
Compiled by VietnamCredit