The global merger and acquisition market faced a substantial 15 percent year-on-year decline, plummeting to $3.2 trillion in 2023, the lowest point in a decade according to Bain & Co.’s annual report. Dealmakers grappled with high interest rates, increased regulatory scrutiny, and mixed macroeconomic signals, prompting a more selective pursuit of deals. The widening gap between valuations was a significant challenge, resulting in an overall strategic deal multiples drop to a 15-year low at 10.1 times. Les Baird, partner and head of Bain & Co.’s global M&A and divestitures practice, highlighted that this drop in deal multiples created a cautious atmosphere in 2023, with many sellers hesitant to engage at a market bottom.
Tech M&A played a pivotal role in the market’s decline, witnessing a 45 percent drop in deal values. Median valuations also plummeted from 25 times in 2021 to 13 times in 2023. Despite this, the energy and healthcare sectors experienced a strong year due to sector-specific dynamics and big-ticket deals. Mega deals, concentrated in the second half of 2023, signaled a potential shift in dealmakers’ outlook. Despite the decline in deal counts, companies maintained high levels of proactive deal screening and due diligence, recognizing the potential emergence of newer, stronger competitors in times of disruption. The report also anticipates a growing role for generative artificial intelligence in dealmaking, with 80 percent of surveyed M&A practitioners expecting adoption within the next three years.