Surprisingly or not, 2022 was not a year of booming M&A activity, as, in 2022, merger and acquisition deals dipped to $3.6 trillion — 38.8% lower than the record-breaking $5.9 trillion of 2021.

While 2022 was not a particularly bright year for mergers and acquisitions, 2023 is expected to bring more prospects due to global economic recessions.

Let’s review the key tendencies that impacted global M&A activity, take a look at some of the world’s largest M&A deals of 2022 and 2023, and analyze trends that will frame the finance industry in the future.

M&A market overview in 2022 and 2023

A report by Dealogic, a financial data provider, highlighted that 2022 M&A activity was consistent. The global M&A value reached $605.6 billion as of the end of 2022, which was 9.3% lower compared to the five-year pre-pandemic average.

In terms of geographic regions, the report notes that the North-American region has been particularly active, with Europe and North Asia having also seen strong levels of M&A activity.

In terms of the economic sectors that fuelled M&A activity in 2022, the report highlights computer and electronics, healthcare, and real estate and property.

According to another report by the law firm Morrison & Foerster, in 2022, there were several trends that supported the steady flow of M&A activity:

  • Tech disruption. In 2022, technology remained a top M&A industry, accounting for 20% of all M&A deals.
  • Private equity. Compared to 2021’s records, private equity deals were down in 2022, but the exits were 43% higher and buyouts were 50% higher, which made M&A activity in the sector consistent as well.

Looking ahead to 2023, the report predicts that M&A activity will continue to be strong, with a focus on sustainability, digital transformation, and environmental, social, and governance (ESG) considerations. The report also notes that there may be some changes in the regulatory landscape, particularly in the areas of antitrust and data privacy.

Recent M&A deals of 2022-2023

With M&A activity slowly recovering after 2022, the economic recession of 2023 brings new promises of accelerated M&A dealmaking. Let’s overview some of the biggest M&A deals of 2022 and preview those scheduled for 2023.

1. Oracle’s acquisition of Cerner

  • Parties: Oracle and Cerner
  • Timeframe: December 2021–June 2022
  • Impact: Oracle planning to expand its influence in healthcare
  • Industry: Software
  • Deal value: $28.3 billion

Oracle, the second-largest software company globally, has set its sights on transforming the healthcare industry. This is why Oracle decided to acquire Cerner, a supplier of health information hardware and technology services. 

The completion of the transaction happened on June 8, 2022, with Oracle purchasing 69.2% of Cerner’s total shares for $28.3 billion. This acquisition is expected to enhance Cerner’s technological capabilities while also allowing Oracle to leverage its expertise in software and data management to revolutionize healthcare delivery.

By enriching Cerner’s digital innovation capabilities and combining telecommunications with data storage, Oracle sets out to create a personalized platform for patients and doctors, providing a more seamless healthcare experience.

2. Vista’s acquisition of Citrix

  • Parties: Vista Equity Partners and Citrix Systems
  • Timeframe: January 2022–September 2022
  • Impact: Vista Equity Partners looking to expand its reach in the software industry
  • Industry: Software
  • Deal value: $16.5 billion

In an effort to support Citrix’s growth strategy and shift towards SaaS, Vista Equity Partners, a renowned investment company specializing in software and big data, acquired the data room software provider. An all-cash transaction was valued at $16.5 billion, with Citrix’s shareholders receiving $104 per share. The transaction also assumed all of Citrix’s debt.

This acquisition ranks among the biggest mergers of the year and has made the new firm one of the world’s most prominent software providers. The combined company now serves 400,000 customers, 98% of whom are Fortune 500 members.

By combining Citrix’s expertise in software production with Vista Equity Partners’ investment prowess, the combined company aims to drive innovation and further extend its expansion into the software market.

3. Johnson & Johnson’s acquisition of Abiomed

  • Parties: Johnson & Johnson and Abiomed Inc.
  • Timeframe: November–December 2022
  • Impact: Johnson & Johnson’s becoming an innovator in the cardiovascular space
  • Industry: Healthcare
  • Deal value: $18 billion

In November, the world’s largest healthcare products company, Johnson & Johnson, announced its $18-billion acquisition of Abiomed. Abiomed is a world-renowned company in heart, lung, and kidney support technologies. The agreed price of $380 per share represents a 50% premium over Abiomed’s trading price.

With this acquisition, Johnson & Johnson sets out to become an innovator in the cardiovascular space, one of healthcare’s largest unmet disease states. 

The announcement of the acquisition resulted in a close to 8% spike in J&J’s stock price, indicating that investors see significant potential in this move for the combined company that was about to become a healthcare giant.

4. Microsoft’s acquisition of Activision Blizzard

  • Parties: Microsoft and Activision Blizzard
  • Timeframe: January 2022–spring 2023
  • Impact: Microsoft planning to increase its influence in the gaming sector
  • Industry: Gaming
  • Deal value: $68.7 billion

In January 2022, Microsoft announced the largest merger of the year by acquiring Activision Blizzard, the creator of the Candy Crush game, in an all-cash transaction worth $68.7 billion at a share price of $95. This move was aimed at capitalizing on the rapid growth of the video gaming industry, which is projected to reach $384.90 billion in 2023.

After the acquisition is completed, Microsoft will become the owner of some of the most iconic gaming products, including Major League Gaming, Candy Crush, Warcraft, Overwatch, Diablo, Call of Duty, and Candy Crush. Microsoft also expects that this merger will accelerate significant growth in the gaming sector across PC, mobile, cloud, and console platforms.

Activision Blizzard will also benefit from the deal, becoming the third-largest gaming company in terms of revenue, behind Sony and Tencent.

5. Broadcom’s acquisition of VMware

  • Parties: Broadcom and VMware
  • Timeframe: May 2022–early 2023
  • Impact: Broadcom planning to expand into the infrastructure and security field
  • Industry: Semiconductor
  • Deal value: $61 billion

In a cash-and-stock deal that involved Broadcom taking on $8 billion of VMware’s net debt, the global technology leader Broadcom acquired VMware — an enterprise software leader focusing on multi-cloud services for apps and virtualization technology.

The completion of the acquisition is scheduled for early 2023, after which Broadcom will operate under VMware’s brand, while incorporating its infrastructure and security software solutions as part of an extended VMware portfolio.

This transaction is expected to provide greater value to VMware’s customers, while also providing greater choice and flexibility for security applications.

6. Amgen’s Acquisition of Horizon Therapeutics

  • Parties: Amgen and Horizon Therapeutics
  • Timeframe: December 2022–first half of 2023
  • Impact: Amgen planning to become a pharmaceutical giant
  • Industry: biopharmaceutical
  • Deal value: $27.8 billion

Amgen is a biopharmaceutical firm that focuses on discovering, developing, and producing pharmaceutical products. On the other hand, Horizon Therapeutics specializes in treating rare autoimmune diseases such as gout, thyroid eye disease, and several inflammatory conditions, with Tepazza being their top-selling medication for eye bulging and double vision.

Amgen acquired Horizon Therapeutics at $116.50 per share, representing a 48% premium over Horizon’s stock prices.

This marks Amgen’s third acquisition in the rare diseases sector and signals a strategic shift toward becoming a pharmaceutical giant. Horizon Therapeutics will also benefit from this deal by making its treatments more widely available and financially lucrative.

7. Extra Space Storage acquisition of Life Storage

  • Parties: Extra Space Storage and Life Storage
  • Timeframe: April 2023–second half of 2023
  • Impact: Extra Space Storage becoming the largest self-storage operator
  • Industry: self-storage
  • Deal value: $12.7 billion

Extra Space Storage has agreed to acquire Life Storage in an all-stock deal valued at $12.7 billion, making it the largest self-storage operator by facility count and increasing its portfolio of self-storage properties by over 50%.

This acquisition will have a positive impact on both Life Storage and Extra Space Storage shareholders, with Extra Space Storage becoming the dominant provider of self-storage in the US, accounting for 13% of all square footage within the industry. The merger will also give Extra Space Storage more exposure to the fast-growing southern U.S.

8. Japan Industrial, Suzuki, and ROHM acquisition of Toshiba

  • Parties: Japan Industrial Partners, Suzuki, ROHM, and Toshiba
  • Timeframe: November 2022–March 2023
  • Impact: Japan Industrial Partners to increase its competitiveness with Japanese conglomerates
  • Industry: technology
  • Deal value: $16 billion

In November 2022, Japan Industrial Partners Inc., Suzuki Motor Corp., and ROHM Co. Ltd. announced their plan to acquire Toshiba Corporation, a company facing financial challenges despite its diverse range of offerings in nuclear power, defense technology, and microchip manufacturing. Toshiba’s board accepted the buyout offer from Japan Industrial Partners in March 2023 — a deal worth $16 billion.

The conglomerate of Japan Industrial Partners, Suzuki Motor Corp., and ROHM Co. Ltd. have been in discussions with banks and finance providers regarding the acquisition, which will benefit Toshiba by keeping the company and its resources operational.

Meanwhile, the acquisition presents an opportunity for Japan Industrial Partners to compete directly with other Japanese conglomerates. The operation will involve a combination of bank loans and shares for the takeover and reconstruction of Toshiba.

9. UnitedHealth acquisition of LHC Group

  • Parties: United Health and LHC Group
  • Timeframe: March 2022–February 2023
  • Impact: United Health 
  • Industry: Healthcare
  • Deal value: $5.4 billion

As healthcare companies are consolidating their services to cater to Baby Boomers’ needs, United Health’s acquisition of LHC Group follows this trend. In February 2023, United Health announced its $5.4 billion acquisition of LHC Group, a healthcare company that offers value-based home care.

The $170-per-share offer that UnitedHealth made to LHC Group represented only an 8% premium over the listed price, indicating long-term potential for outstanding value for the acquirer. The transaction underwent thorough scrutiny by the FTC before being approved. 

After the acquisition, United Health is set to integrate LHC Group into its Optum division.

10. Pfizer’s acquisition of Seagen

  • Parties: Pfizer Inc. and Seagen Inc.
  • Timeframe: March 2023–early 2024
  • Impact: combining Pfizer’s and Seagen’s pipelines in next-gen biologics
  • Industry: biotechnology
  • Deal value: $43 billion

In March 2023, Pfizer and Seagen announced that they had entered into a merger agreement. With it, Pfizer will acquire Seagen, a biotechnology company that develops cancer medicines, for $43 billion. The transaction will happen through a combination of short-term financing, existing cash, and $31 billion of new debt.

The transaction is expected to face certain scrutiny due to antitrust regulators. Still, the merging companies expect to close it in late 2023 or early 2024, after meeting customary closing conditions and getting regulatory approvals and approvals from Seagen’s stockholders.

The planned purchase is also anticipated to facilitate the possibility of combining the Seagen and Pfizer pipelines, utilizing Pfizer’s abilities in protein engineering and medicinal chemistry to enhance Seagen’s ADC technology for discovering potential new target combinations and next-gen biologics.

What to expect from the market in the rest of 2023?

During the first quarter of 2023, the global M&A deal volume totaled $559 billion, the third-lowest quarterly deal volume in the past decade. The only quarters with lower transaction volumes were Q1 2013, with $502 billion, and Q2 2020, which was during the early stages of the pandemic, with $442 billion in transaction volume.

The first quarter of 2023 ended with three globally announced M&A deals still pending, each valued at $10 billion or more, following the announcement of two such transactions in March.

With only two $10 billion-plus deals announced in 2022’s third quarter, the first half of 2023 marks the slowest M&A activity since the start of 2018.

In February, eight M&A deals were announced among US banks, totaling $342.3 million. This brings the total number of deals in 2023 up to 14, following the slowest January in 14 years.

Despite this surge in activity, the first quarter of 2023 saw the largest transaction since May 2022 — it’s Pfizer’s acquisition of Seagen, which we’ve already reviewed above.

Deloitte names the following factors as reasons behind such a surge in activity:

  • The M&A markets are facing uncertainty due to various economic headwinds, such as inflation, which peaked at 9.1% in June 2022 but has since flattened to 6.0% in February 2023. This has provided companies with better pricing power but has also muted demand, which means that financing costs are still likely to rise.
  • Talent shortages have also presented a challenge for some sectors and organizations, although waves of layoffs have been seen recently in big tech, financial services, and manufacturing. The new workplace, with increasingly activist employees and hybrid work culture, creates new challenges to restructuring and is a potential red flag for deals.
  • External factors such as increased disruptions to operations, supply chains, and economies, as well as geopolitical turmoil and new virus strains continue to emerge but are generally less harmful and disruptive than those seen in 2020.

Regarding the M&A activity in Q2–Q4 of 2023, the PwC’s 2023 Global M&A Industry Trends Outlook predicts an increase in M&A activity in the second half of 2023.

Despite the overall macroeconomic volatility due to recession fears, rising interest rates, declining equity valuations, geopolitical tensions, and supply chain disruptions, 60% of global CEOs surveyed in PwC’s survey are not planning to delay deals in 2023.

Another report by Bain & Company identifies five key M&A trends that are expected to drive M&A activity in 2023. These are:

  1. Cash-rich companies are expected to make more strategic bold moves. Such companies will focus on reviewing their strategic M&A plans, reassessing deal structures, and preparing to move quickly on attractive targets. Companies that have previously succeeded with M&A deals will be best positioned to carry out major transformative transactions, especially in sectors with substantial cash reserves like energy, industrials, and technology.
  2. The balance of scope and scale deals will increase. Assets with cash flow and a clear path to synergies will be in high demand in a high-interest rate environment and a weak economy, leading to a focus on scale deals in the near term. However, there will also be a continued appetite for scope deals, which enable rapid business growth and efficiency.
  3. Small- to midsize deals will remain prevalent. The majority of M&A activity consists of deals valued under $500 million, which is expected to continue. Companies seek M&A to meet strategic goals, such as market expansion, growth, and capability development. Small to midsize deals will be simpler to execute than megadeals, as they have lower risk, require less financing, and face less regulatory scrutiny.
  4. Pressure on valuations will increase. Valuations in M&A deals are expected to be more conservative due to uncertainty surrounding capital cost and availability, as well as the macroeconomic outlook. With their strong appetite for dealmaking, record amounts of dry powder, and resilience in fragile economic environments, private equity firms will be willing to pay reasonably for desired assets.
  5. The trend for divestitures and separations will continue to grow. Although in 2023, boards may take divestitures more seriously, selling underperforming assets may be difficult due to the fear of loss. However, it is often better to sell the declining assets rather than hold onto them, as no amount of multiple expansion can compensate for the dwindling business. Divestitures are more likely to occur in sectors undergoing transition and can provide funds for new investments.

Another report by Morgan Stanley predicts an increase in cross-border M&A transactions, the growing influence of financial sponsors, and unstable performance among companies struggling with shareholder activism.

The market must adapt to these trends to preserve stable M&A activity in the Q2–Q4 of 2023 and further.