A new report from BMS, the independent specialist insurance and reinsurance broker, suggests that mergers and acquisitions (M&A) activity could “bounce back” towards the latter half of 2023.
BMS looked at M&A trends from 2022 and provided an outlook for 2023 in the European, North American, and Asian markets.
It noted that the M&A landscape has been impacted by various macro developments, including the Covid-19 pandemic, war in Ukraine, concerns around recession, higher interest rates to curb inflation, and risks associated with the recent banking crisis.
Despite this, BMS says that private equity and corporates have continued to find opportunities, and remains optimistic that activity may pick up later this year, despite deal volumes having fallen compared to the high levels achieved in 2021 and early 2022.
Analysts report that the M&A insurance market in 2022 was close to matching the record-breaking deal volume of 2021, and believe there is growing appetite in the M&A insurance market, with BMS seeing circa 40% growth in insurance products purchased over the past 24 months.
Deal size in 2022 was affected by the deceleration in M&A activity coupled with a rise in interest rates, with insurers noticing a reduction in average enterprise value as investors are less able to commit to high deal multiples.
Also, a notable uptick in claims from policies underwritten during the pre-2022 M&A boom has resulted in reinsurers looking to manage risk to a much greater degree, accounting for lower primary policy limits and an increase in excess policies as a proportion of an insurer’s book.
“2023 has gotten off to a subdued start compared the deal activity levels seen over the past two years,” explained Tan Pawar, Head of Private Equity and M&A at BMS
“However, momentum is growing, and we have not seen a decrease in enquiries from companies eager to obtain M&A insurance,” he added. “With market conditions expected to stabilise, we should see a resurgence in deal activity by the end of Q2 and into the second half of 2023.”
