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By Anna J. Park
The global M&A market is forecast to boom, despite economic recessions and soaring inflation, as companies come under pressure to sell parts of their businesses and cut debt, according to a recent Samil PwC's global M&A trend report.
The report went on to say that while M&As in fast-growth sectors such as IT, bio and healthcare have so far been dominant, companies are facing the need to sell their non-essentials to improve efficiency in their capital allocation strategies. Corporations are reducing debts to further manage their liquidity and risk management.
While forced to sell non-core business units for optimization of their business portfolios, capital-abundant corporations with aggressive growth goals will have many opportunities to acquire companies at a reasonable valuation, the report added.
The report also pointed out that the amount of "dry powder" ― investor cash held by private equity (PE) yet to be allocated ― has rapidly increased to $2.4 trillion, and this will lead PEs to increase investments, in turn facilitating more M&A deals across the globe.
The number of global M&A deals decreased to 54,452 cases, amounting to $3.3 trillion last year, which is a 17 percent fall from the previous year in terms of the number of transactions, and a 37 percent decline in terms of the transactional amount. Likewise, the number of local M&A deals last year shrank to 1,905 cases, amounting to $71 billion, a 19 percent year-on-year fall in the number of deals and a 33 percent fall in terms of transactional amount.
"The M&A market showed a relatively poor performance last year compared to the previous year, due mainly to an increase in the cost of financing with the interest rate hike and macroeconomic uncertainty. However, the fallen valuation of assets, which are features of the economic recessional period, will provide an optimal opportunity for M&A deals," Park Dae-joon, Samil PwC Korea Partners leading M&A deals, said.
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