European M&A activity started slowly in 2023, with January deal volumes and values dropping significantly year over year.

There were 1,149 deals announced in January across all sectors, a 29.9% decline on January 2022, S&P Global Market Intelligence data shows. Aggregate transaction value fared worse, falling 51.5% to €14.78 billion.

Compared to 2022, January would have been the lowest month for aggregate valuations and the second-lowest month for volumes.

The weak start to the year is further bad news for investment banks, who endured a dismal 2022 for their advisory work and have slashed jobs as a result. Executives had cautioned that a rebound in the M&A market would take some time given the continuing macroeconomic volatility.

Barclays PLC earlier this week reported a 50% drop in investment banking fees for the fourth quarter of 2022, in line with its global peers. The U.K. bank has not seen any significant signs of a recovery in activity so far this year, CFO Angela Cross said.

The largest deal announced in January was private equity firm Triton's offer to take Finnish construction services company Caverion Oyj private in a €1.37 billion transaction. This was followed by Italy-based Chiesi Farmaceutici SpA's €1.17 billion deal for Ireland's Amryt Pharma PLC and private equity firm Platinum Equity LLC's €930 million deal for French industrials business Imerys SA's high temperature solutions unit.

Tug of war

Whether Triton's pursuit of Caverion succeeds is far from certain. A consortium led by Bain Capital Private Equity (Europe) LLP in November 2022 lodged a bid for Caverion and, in response to Triton's offer, has since improved the terms of its proposal.

Bain's proposal has been recommended by Caverion's board. In addition to the higher offer price, Caverion believes Bain's offer is less likely to face competition scrutiny and would be completed faster than Triton's.

The battle has provided no shortage of advisory mandates. Triton has called on Danske Bank A/S, Deutsche Bank AG and JPMorgan Chase & Co. for financial advice, while Bain's consortium has enlisted Advium Corporate Finance Oy, BNP Paribas SA, The Goldman Sachs Group Inc., Nordea Bank Abp and UBS Group AG. Caverion is being advised by Bank of America Corp.

Industrial strength

The industrials sector accounted for the largest proportion of deals during the month at 270, followed by technology, media and telecommunications at 237.

On a geographic basis, the U.K. and Ireland led the way with 345 transactions. There were 222 deals in France and Benelux — Belgium, the Netherlands and Luxembourg — and 182 in the DACH region, comprising Germany, Austria and Switzerland.

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