BMS, the independent specialist insurance and reinsurance broker, today announces the release of the latest edition of its global Private Equity, M&A and Tax (PEMAT) Report. The report provides a comprehensive analysis of the trends from 2022 and provides an outlook for 2023, in the European, North American, and Asian M&A markets.
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, private equity and corporates continue to find opportunities. While deal volumes have fallen compared to the high levels achieved in 2021 and early 2022, BMS remains optimistic that M&A will bounce back towards the latter half of 2023.
Key findings
- Despite an increasingly challenging macroeconomic environment, the M&A insurance market in 2022 was close to matching the record-breaking deal volume of 2021.
- Growing appetite remains 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.
- 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.
- No notable rise in distressed M&A targets, with short-term macroeconomic impact of Covid-19 largely tapering off in 2022. However, a potential global recession in 2023 is expected to increase quantity of distressed sales.
- Renewables and infrastructure sectors have proved resilient, seeing an increase in deal volume of 8.7% in 2022 as compared with 2021.
- Although European M&A activity tailed off in the latter half of 2022, the tax insurance market saw a record number of enquiries.
- Secondaries market remained active in 2022, with total transaction volume exceeding $100 billion for the second year running.
Tan Pawar, head of private equity and M&A at BMS, said: “We are delighted to bring you the latest edition of the PEMAT report. 2023 has gotten off to a subdued start compared the deal activity levels seen over the past two years. However, momentum is growing, and we have not seen a decrease in enquiries from companies eager to obtain M&A insurance. 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.”