M&A activity in the global industrials sector was largely influenced by the outbreak of the COVID-19 pandemic in 2020, the re-opening of the global economy in 2021, and the subsequent inflationary economic environment that followed in 2022. Fears of higher inflation in the latter half of 2021 spilled over into 2022, causing investors to remain on the side-lines during the first half of the year. As a result, deal activity declined 10% in the first half of 2022 compared to the previous six months. As inflation fears realised and became problematic in the latter half of 2022, M&A activity decreased even further, resulting in deal activity for the year ending 13% lower than 2021.

Despite the slowdown in the second half of 2022, deal activity is expected to pick up in 2023, as over 2,000 transactions were announced during 2022 but were not concluded. Moreover, private equity’s involvement in the industry has been relatively stable over the last year, accounting for 18% of all completed transactions. Given that this is in line with the industry’s 5-year average, we expect private equity investors to play a similar role in M&A activity during 2023.

Given the diverse nature of the sector, it has historically provided a stable environment for mergers and acquisition activity. The outbreak of the COVID-19 pandemic in 2020 and the subsequent inflationary environment in 2022 however, introduced the sector to unprecedented uncertainty, resulting in deal activity declining during both years.

Global deal activity decreased by 11% during 2022 after reaching record highs the year before. While deal activity declined during 2022, deal values increased.

M&A activity in the global financial services sector has been trending lower over the past 5 years. 2021 provided the industry with some respite, breaking the downward trend and reaching new 5-year activity highs. This was however short lived as turmoil in the financial markets relating to the outbreak of the new Omicron variant and inflation fears forced investors to be cautious and remain on the side-lines. As a result, deal activity in the first half of 2022 ended 25% lower than H2 of 2021. With transaction activity declining even further in the second half of the year, deal activity for 2022 closed 23% lower than the year before.

Although deal activity was lower during 2022, it is expected to rebound in 2023 as many transactions that were put on hold last year, are expected to close in the next 12 months. Another positive factor to consider is the involvement of private equity’s (“PE”) in the sector. The investor group was active during 2022, accounting for approximately 24% of all completed transactions during the year with similar activity levels expected throughout 2023.

As the global economy began recovering from the pandemic in the second half of 2020, the metals and mining sector benefited from rebounding commodity prices. Demand for most metals was driven upward by the release of pent-up consumer spending, new government stimulus efforts and an accelerating global energy transition.

The South African Food & Beverage industry has historically provided a stable environment for M&A activity. This has somewhat changed in recent years with deal activity in 2021 and the first half of 2022 significantly lower than the years before.