Fourth-quarter 2022 M&A activity marked a weak end to a depressed year in North America as rising interest rates and a slowing economy dissuaded companies from expanding.
The total value of mergers and acquisitions in the U.S. and Canada dropped to $1.477 trillion in 2022, down 41.4% from 2021, according to S&P Global Market Intelligence data. The number of transactions in 2022 fell 21.2% year over year to 20,965.
Activity was particularly slow in the second half of 2022 with $517.85 billion of deals, down 38.2% from the first six months of the year and less than half the total in the same period in 2021.
Rate rises kill dealmaking
M&A activity surged to a record high in 2021 as ultra-low interest rates and the Federal Reserve's quantitative easing program flooded companies with cash and cheap credit. The emergence of runaway inflation pushed the Federal Reserve to reverse its monetary policy and, with it, remove the cheap financing that had fueled M&A.
As a result, the $68.99 billion Microsoft Corp. takeover of gaming company Activision Blizzard Inc. agreed on in January ended up being the biggest deal of the year, just ahead of Broadcom Inc.'s $67.99 billion deal for VMware Inc. The Microsoft-Activision deal has drawn regulatory scrutiny in the U.S.
Elon Musk's much-watched private takeover of Twitter Inc. was the third-largest deal and has so far proven to be a difficult transition that has contributed to a sharp slump in the share price of Tesla Inc., Musk's electric car company.
Sector activity
Activity in the consumer sector in the fourth quarter of 2022 was driven by The Kroger Co.'s takeover of Albertsons Cos. Inc. The $30.60 billion merger between two of the largest supermarket chains in the U.S. is subject to regulatory hurdles, and the lesson of Microsoft's Activision deal suggests regulators are increasingly sensitive to anti-competitive practices.
The industrials sector had a strong fourth quarter with deals for IAA Inc., Westinghouse Electric Co. LLC and Maxar Technologies Inc. among the 10 largest deals in the sector during the period.
By contrast, dealmaking was weak in the real estate and technology, media and telecommunications sectors in the last three months of 2022.
