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Is it $5 trillion? These are expert forecasts for the deal market in 2023

 Expectations of international investment bank experts indicate the possibility of a return to momentum for some sectors

This year has already been a sobering year for dealmakers after the record crash in 2021, when mergers and acquisitions values fell by nearly a third, and the IPO market was effectively shut down.

Inflation, high interest rates and war are the main reasons for fueling recession fears, which made investors not participate in the market and affected the availability of financing to conclude deals. While there were sectors witnessing increased activity, bankers and lawyers are looking forward to a recovery in most major sectors and regions during 2023.

We spoke to top dealmakers to get their predictions for the next 12 months - on everything from technical valuations to when an IPO will return. Here is a selection of responses:

Jim Langston, Co-Head of Mergers and Acquisitions, US law firm Cleary Gottlieb Stein & Hamilton

Deal flow in 2023:

“Businesses are becoming more comfortable operating in this environment. While there is not complete certainty about what the Fed will do next year, where CPI data will come out or where employment levels will fluctuate, I think there is a better picture for that. We think next year will be more more activity compared to this year. Next year's quiver is full of developments."

Brian Howerket, Co-Head, US Mergers and Acquisitions, Goldman Sachs

Regarding deal values:

“Next year you could easily be looking at $4 trillion in deals, kind of like what we're seeing right now. But whether it could be $5 trillion or $3 trillion, it all depends on stability happening to relaunch a lot. of suspended activity.

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Kevin Bruner, Co-Head, Global Mergers & Acquisitions, Bank of America

The most active sector in the coming year:

“We expect technology to continue to lead, as a number of different digital strategies have been developed in almost every industry over the past few years. Not only are tech companies acquiring peer companies, but consumer companies are becoming consumer technology companies, and industrial companies are becoming To industrial technology companies. We're seeing activity and investment in technology across the entire landscape."

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Saba Nizar, Global Co-Head of Financial Sponsors at Bank of America

private equity firms rebound

“The key factor to watch is when the US Federal Reserve raises the federal funds rate to a peak level. When buyers can price risk appropriately for equity (equity) and debt. Liquidity will return to the credit markets allowing investment banks to de-risk, consolidating loans "This situation will create the ability to underwrite new transactions. In the first half of next year, we might see more minority deals, where you don't have to refinance and then activity could pick up significantly from the third quarter."

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Nick Fowler, Co-Head of Capital Markets, EMEA, Lazard Ltd.

Waiting for the return of IPOs:

“We mostly advise issuers to wait until the right time comes. There are no real incentives to reopen the IPO market on a large scale. Realistically, we expect the first wave of listings during the second half of 2023, and for most companies, the schedule can be pushed back.” The IPO calendar extends to 2024. Among other things, it is becoming increasingly difficult for companies to set their revenue or profit forecasts with certainty.

Christoph Hoer, Co-Head Capital Markets Northern Europe, BNP Paribas

IPOs and stock-related deals:

“In any year, as with this year's Porsche IPO, the strongest deals will attract buyers, but these successful deals are unlikely to lead to a wave of issuance. We expect a series of deals in the equity-linked market. As the cost of debt grows, it will trend Companies have turned to other means, mostly issuing convertible bonds, to fund upcoming maturities and other capital needs.

Lawrence Jamieson, Head of Capital Markets EMEA, Barclays

Liquidity demand from shareholders:

“Requests for liquidity provision from shareholders have so far been relatively subdued, in part due to the recapitalization of many corporate financial positions during Covid. However, we expect to see a pickup in capital raising activity from early next year, likely to be concentrated in Companies in sectors where the change in the interest rate environment had a primary impact on their profitability.

Bankers are concerned that initial public offerings (IPOs) will remain scarce in 2023

Manolo Falco, Global Co-Head of Banking, Capital Markets and Advisory, Citigroup

Europe Attraction:

“There is a pessimistic view on Europe right now, but I think it's a bit exaggerated. Europe will continue to be important in the global economic landscape. With the cheap currency and low valuation factors, I expect there will be money flowing into Europe next year. All our major customers They are very keen to expand in the US and Asia, but I don't think Europe will be ignored."

Stock strategists expect the Asian market to recover after a difficult year in 2022

Bagrin Angelov, Head of Cross-Border Mergers and Acquisitions, China, China Intern

International Capital Corporation.

For Chinese buyers:

“Outbound mergers and acquisitions from China are well below the peak level during 2016 and even the average of the past 10 years. However, the downward trend is nearing the bottom, and we can expect an uptick in outbound deals over the coming years. There is certainly appetite on the part of companies "Even if the trend does not necessarily translate into announced deals, the level of interest is still there."

Sales of Chinese stocks in Europe may continue to boom in 2023

Guillermo Baigual, Co-Head, Mergers & Acquisitions, EMEA, JPMorgan

Regarding infrastructure:

“Infrastructure has been one of the hottest sectors this year for deals, and we expect to see continued high levels of activity next year. There is a lot of capital being raised in the asset class, and if you think about co-investment with partnerships "Across the three main pillars of infrastructure - transport, communications and energy - we foresee a wide range of opportunities."

Burkhard Kopp, Head of Communications and Media for EMEA, JP Morgan

telecom deals:

“We expect more market consolidation and fewer cross-border deals in 2023. Shareholders are not supportive of telecom operators paying big money for M&A at the moment. We can also expect more divestitures from telecom operators to reduce debt.” .

Wilhelm Schulz, Global Co-Head of Technology Investment Banking and Capital Communications at Citigroup

Challenges facing the sector:

“With interest rates still rising, it is difficult to make a convincing valuation case. This will limit activities in digital infrastructure such as telecom towers, data centers, cable and fiber because their value cannot keep up. Wireless consolidation will depend largely on the position of regulators.”

Melissa Sawyer, Global Head of Mergers & Acquisitions, Sullivan & Cromwell

New leaders:

“I think the first quarter will be slow, except for healthcare and life sciences, but things will probably pick up after that. People should watch the CEO market. We've seen a lot of CEO turnover and there are a number of companies that need succession plans as we approach. CEOs out of retirement. We can see this leading to mergers and acquisitions.”

Natasha Good, Partner, Freshfields Brockhaus Deringer

Technical evaluations:

“It may be more difficult to get financing from normal sources next year compared to the situation this year. Companies that can show a good path to profitability and those that can show a good path to expansion may be able to get good ratings.”

Dietrich Becker, partner at Perella Weinberg Partners

Sectors to watch:

"It's always great to join our industry in a down market. It's going to be competitive to get the best jobs, but once in, it's going to be an exciting time as the markets recover. Infrastructure and (energy-sensitive) industries will be especially active."

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Burke Hesse, Partner at Latham & Watkins

Private equity firms' acquisition of publicly traded companies in Germany:

“The number of peer-to-peer lending in Germany, which has been much discussed but done in a few cases in the past, may in fact reach a record high in 2023 compared to the previous two years. Many sponsors are actively looking at opportunities like these deals, as Listed companies' valuations would drop significantly in certain sectors if debt providers could be persuaded to support such transactions."