Global insurance mergers and acquisitions (M&A) activity saw a 10-year high in 2022, though a marked downturn in H2 as economic pressures began to impact investor sentiment has left the outlook for 2023 somewhat mixed, says global law firm Clyde & Co.
There were a total of 449 completed M&A worldwide in the insurance sector in 2022, up from 418 in 2021. The marked downturn in H2 saw 207 deals completed, compared to 242 in H1.
According to Clyde & Co, the Americas remained the most active region for M&A in 2022 with 236 deals, up 5% from 2021. Deal volume in H1 2022 reached its highest level since 2011 with 132 deals but dropped 21% in the second half of the year to 104.
Meanwhile, Asia-Pacific saw the highest year-on-year increase in percentage terms with 60 transactions in 2022, up from 42 in 2021. It also saw a 22% increase in the second half of the year, the only region not to experience a dip in that period.
Activity in the Middle East and Africa was up 41% year-on-year, propelled by a strong first half (16 deals) followed by just eight in H2 2022.
Europe saw the smallest annual increase with 127 transactions in 2022, up from 125 the previous year, while H2 2022 marked the second consecutive period of declining activity in the region.
Eva-Maria Barbosa, Chair of Clyde & Co’s Corporate & Advisory Group, said, “Despite the return of inflation, and measures from central banks to restrict liquidity, deals that were put on hold during the pandemic continued to come to market in 2022, maintaining the upswing in deal-making that began the previous year.
“However, looking ahead, underlying trends point to mixed investor sentiment. Deal-makers in the Americas and Europe are displaying a heightened sense of caution as they switch to wait-and-see mode in the face of market uncertainty, which will likely result in a lag in overall transaction volume.”
Barbosa continued, “In contrast, investors in Asia-Pacific were generally slower to regain confidence post-pandemic, but have put that reticence behind them with a consistent and increasing trend of rising deal numbers.
“The re-opening of China’s borders following lockdown restrictions will only serve to bolster confidence in the region further.”
Clyde & Co states that market sentiment indicates that the worst of the economic downturn has passed in most parts of the world and that deal-making will come back on the agenda.
Therefore, it expects M&A volume to drop from the highs of 2022, but start to rebound in the second half of 2023, with larger deals especially in focus.
Barbosa concluded, “Uncertainty continues to provide barriers to growth for the insurance sector, with significant headwinds coming out of the events of the last year.
“The war in Ukraine continues to complicate global trade and drive up costs, while some eye-opening weather events in 2022 that exceeded all loss expectations have confounded the property catastrophe (re)insurance market.
“However, there is optimism that the economy is set to emerge from this difficult period as inflation stabilises. When it does there remains plenty of capital to be deployed and likely no shortage of M&A targets.
“As investor sentiment improves, ambitious insurers, particularly at the top end of the market – as well as private equity houses – will move to seize these opportunities.”
