The recently published report ‘Mergers and Acquisitions (M&A) Deals by Top Themes and Industries in Q2 2022’ analyzes all deals that were announced in Q2 2022 globally. It covers a wide range of sectors, including aerospace, defense & security, apparel, automotive, banking & payments, construction, consumer, foodservice, healthcare, insurance, medical devices, mining, oil & gas, packaging, pharma, power, retail, technology, media & telecoms (TMT), and travel & tourism.
The market weakened in the first quarter of the year, with deal value in Q1 2022 lower than every quarter in 2021. However, deal value surged in Q2 2022, due to a number of large deals during the quarter. These included the $69 billion acquisition of VMware by Broadcom; the $58.5 billion merger agreement between HDFC Corp and HDFC Bank; and Philip Morris International acquiring more than 90% of Swedish Match for $17.3 billion. So, while Q1 2022 saw a sharp decline in deal value from the previous quarter, the M&A market in Q2 2022 grew by 23% in comparison. However, as in Q1 2022, deal volume continued to decline.
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The TMT sector dominated M&A activity in Q2 2022
The TMT sector dominated in terms of both M&A deal value and volume among all sectors, with 2,717 deals worth $299 billion recorded in Q2 2022, driven by the cloud and digital media themes. In this sector, value increased by 15% in Q2 2022 from Q1 2022, after decreasing in each consecutive quarter since Q1 2021. Several big deals contributed to TMT’s leading position. Examples included the acquisition of VMWare by Broadcom for $69 billion; Black Knight’s acquisition by Intercontinental Exchange for $16 billion; and IFM Investors and DigitalBridge acquiring Switch for $11 billion.
Cloud, along with digital media, are two of the most prominent themes in the TMT sector each year. Rising competitive pressures and the challenging economic backdrop have forced many companies to turn towards cloud technologies to stay ahead in the market. As a result, M&A activity in the cloud space continues to accelerate and there will be more deal activity in this theme throughout the remainder of the year.
The APAC region witnessed the highest growth in Q2 2022
M&A activity was contributed mainly by North America-based target companies, but the Asia Pacific region (APAC) saw the highest growth in deal activity, both in terms of deal value and deal volume in Q2 2022, when compared to Q1 2022. India, Australia, and China were the leading countries in terms of deal value in the APAC region and India alone accounted for half of the top 20 deals that happened in the region. South Korea, Indonesia, Malaysia, and Japan were the next APAC countries to contribute in terms of deal value. Despite major geopolitical and financial headwinds around the world, M&A activity in the APAC region proved resilient in Q2, especially in India. The two biggest deals seen in India in Q2 2022 were the Housing Development Finance merging with HDFC Bank for $58.5 billion, and the acquisition of a 25% stake in Adani New Industries from Adani Enterprises by TotalEnergies for $12.5 billion.
Continued Covid-19 lockdowns have led to sluggish M&A activity in some countries, such as China, although the activity is expected to recover in the near future as major Chinese cities including Hong Kong, Beijing, and Shanghai slowly return to normality. With the progressive lifting of Covid-19 restrictions and stable governance, investor confidence is rising in many Southeast Asian countries. Companies in the region are looking for innovative technology to remain competitive under rising pressures in the supply chain, fulfillment, and macroeconomic headwinds. Despite current investor optimism in APAC, rising interest rates and high inflation will still create challenges for upcoming deals globally. Global uncertainties like the Russia-Ukraine conflict and the market concerns regarding recession will make companies less likely to undertake deals in the second half of 2022.
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