DealLawyers.com Blog

Developed in partnership with MergerMarket, Aon recently published a report entitled “M&A Risk in Review,” which references survey data from 50 senior executives from corporate development teams, private equity firms, and investment banks and Aon’s own experience providing transaction advisory and/or insurance solutions on deals in the first half of 2023. The key takeaways from the report highlight the impact that certain macroeconomic conditions and trends are having on dealmaking. Here are some of them:

– In response to the challenging economic and credit environment, large subsets of respondents are shifting their M&A strategies to focus more on alternative investments (34%) and minority deals/joint ventures (32%). Divestments and restructuring-related deals are also expected to come to the fore (28%), with many companies likewise narrowing their focus on core sectors and geographies (30%).

– With the recent banking crisis still fresh in everyone’s minds, 72% of respondents expect financing conditions to worsen compared to 2022, including 38% who expect them to become much more challenging. In response, dealmakers are turning increasingly toward alternative financing sources, including private equity (64%) and non-bank lending (38%).

– Almost all survey respondents, 96%, expect ESG scrutiny in deals to increase over the next three years, including 48% who expect it to increase significantly. Relatedly, 24% say environmental litigation creates the most concern with respect to potential disputes in a deal, up from just 2% who said the same in the previous edition of this research in early 2022.

– Appreciating the potentially massive risk involved in acquiring a company with subpar defenses, the vast majority of respondents to our survey, 86%, say they are likely to abandon a deal if they uncover a material cybersecurity risk at the target company, including 32% who say they are very likely to walk away from a transaction.

– Meredith Ervine