Recession and M&A – Will expensive borrowing and recessionary fears halt deals?

The Bank of England has warned Britain will plunge into a year-long recession this autumn, as it hikes interest rates to 1.75%, the biggest rise since 1995. But, how will this affect M&A? Will momentum drop in the second half of 2022? Will expensive borrowing and recessionary fears halt deals? Merlin Piscitelli, Chief Revenue Officer at Datasite, shares his thoughts below:

Merlin Piscitelli says: “Companies unable to refinance because new funding is not available or because it’s too expensive, are going to be at the forefront of the recessionary impact. Distressed assets may rise along with potential below market investment opportunities. Recession driven M&A activity involving distressed assets may rise.

At the same time, the greatest competitive market shifts often take place during turbulent times and there’s still plenty of corporate and private equity capital to fund deals, especially as valuations begin to moderate. The relentless pressure from new technologies is forcing many companies to make acquisitions. Traditionally, IPO volume is impacted in times of volatility, so alternative sources of capital or transactions are more likely, including PE suitors.

Ultimately, today’s current economic conditions are influencing transactions, particularly the length of time it takes to originate and complete a deal, but it won’t stifle them.  Despite geopolitical uncertainties and overall market volatility, global deal activity itself is still strong.”

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