January 27, 2023

M&A Outlook: Macro Trends Driving 2023 Deals

What’s going to drive M&A activity in 2023?  Willis Towers Watson thinks the answer lies in four macroeconomic trends – the quest for digital transformation, rising interest rates & economic instability, opportunities created by supply chain disruption, and the “mainstreaming” of ESG in M&A.  This excerpt from WTW’s recent report on these trends addresses supply chain opportunities:

Supply chain chaos became acute in 2020 as many industries were hamstrung by a need for more access to parts and products from other regions, namely China. The disruption caused to manufacturing and technology has been a game-changer. The need to get products closer, faster and cheaper to market makes potential sellers “in country” far more attractive.

These disruptions to supply chains are likely to be long-term issues continuing well into 2023, and companies will look to M&A transactions to boost their operational resilience. To maintain efficient, cost-effective operations and to equip themselves for disruptions due to unexpected external forces, businesses will focus on reinventing their supply chain networks with onshoring and sourcing suppliers closer to production facilities.

The report offers an upbeat conclusion – while M&A flourishes in confident markets, there are also opportunities during downturns.  As the markets adjust to continuing instability, potentially higher interest rates and inflation, M&A will remain a priority on the boardroom agenda and dealmakers with technology needs and a sound deal justification will find plenty of opportunity.

John Jenkins