Our thinking

Mixed Signals: US M&A FY 2022

What's inside

Despite a strong start to the year, deal activity in the US faced new challenges in 2022 as headwinds gathered.


Although the record-breaking deal activity of 2021 spilled over into 2022, headwinds in the first quarter developed into a significant slowdown during the rest of 2022, with an expectation of continued slowness as we enter 2023

This time last year, the US M&A market continued to be busy with deals in the pipeline from 2021, both deals proceeding to signing, and signed deals in the process of moving to closing.

However, it was evident from early in 2022 that new M&A activity was going to be down significantly from 2021. Cracks were already beginning to show the year before, as the Federal Reserve's language took a more hawkish turn. Talk of inflation being "transitory" shifted. By March, the Fed had made its first interest rate hike in four years. By mid-year, the S&P 500 had entered a bear market.

Since first tightening its monetary policy, the central bank has raised the federal funds target rate by a full 425 basis points (bps). This is the fastest pace of change in modern history. By December 2022, the brakes were being pumped a little less, rounding off the year with a 50 bps increase.

Nevertheless, Fed chair Jerome Powell's language remained resolute at a December 14 press conference announcing the increase: "We have covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do."

Officials forecast up to a total three-quarter point more in interest rate increases this year—the Fed's policy extending longer than many had anticipated. Some are still hopeful that a pivot is not far away. Bond markets have been calling the Fed’s bluff with two-year US Treasury yields peaking in November and dipping below the federal funds rate.

As inflation shows signs of rolling over and economic growth stalls, opinion is divided over what 2023 holds in store—a soft landing or a hard landing. Even if the Fed eventually walks back its recent comments with a course correction, that would suggest that it has overshot the mark.

What is clear is that the first half of 2023 will not carry with it the spillover momentum seen in early 2022, and some investors are bearish on how 2023 will fare. Nevertheless, another camp remains cautiously optimistic. Taken as a whole, 2022 put in a solid performance as compared to historic performance. The real story, however, is that deal activity trended down with each successive quarter as valuations fell, corporate equity issuances became less attractive and debt financing was increasingly costly and less accessible.

As the articles in this report demonstrate, we do not see an early return to a busy M&A market. Opportunistic strategic M&A will dominate until questions regarding a recession are answered and confidence in the stock market returns.

US M&A in review: Momentum can only take you so far

M&A started strong in 2022 with robust deal activity and megadeals dominating the landscape that was largely the result of unprecedented spillover from 2021. But then, things took a turn and deals stalled in the second half of the year, as shifting macro-economic conditions began to take hold.


Private Equity in focus

The US private equity (PE) market in 2022 aligned overall with the broader M&A trend—activity eased off considerably, year-on-year, but remained above historic levels—and like the M&A market at large, it tailed off as the year progressed, but what does this mean for the year ahead? 

Manhattan, NY


Sectors overview: M&A activity ebbs across

With some rare exceptions—namely in the oil & gas and energy sectors—deal activity was down in 2022 as a sense of fatigue set in following a prolonged period of high deal activity and as inflation and rising interest rate concerns took center stage.

oil pump jack

Technology leads the charge yet again

Technology continued to drive M&A activity in 2022 despite the odds being stacked against the sector.


PMB performs as pharma groups repurpose their portfolios

After a year of historic profits in 2021 following the mass roll-out of COVID-19 vaccines and related treatments, big pharma companies armed with cash for deals have been shifting their attention.


A flurry of activity early in 2022 sees real estate outperform

Real estate has historically shown resilience during challenging economic periods and is considered a reliable hedge against inflation—but not all assets are created equal, and dealmakers were highly selective in the transactions they pursued in 2022.


In Focus

Decisions from Delaware

Notable decisions from Delaware courts

In the second half of 2022, Delaware courts issued several decisions affecting M&A deal-making.

Supreme court of US


Possible return to “normal,” but it could take a while yet to get there: Six M&A trends for 2023

After peaking in 2021, the 2022 US M&A market was always going to seem slow by comparison—but what is likely to drive activity in the months ahead?

Manhattan, NY

European M&A: The mighty dollar opens doors for US bidders

US bidders had the opportunity to capitalize on the strength of the dollar in 2022, which rallied as the Federal Reserve took action on its interest rate policy to curb inflation

3 min read

For deal certainty, it is essential that US acquirers develop a clear FDI roadmap that accounts for any potential obstacles.

There were 1,309 M&A deals in Europe involving US bidders last year—a 9 percent decrease in volume, year-on-year, and a 41 percent decrease on 2021's total value, at US$423.3 billion. Despite these declines, however, US buyers who pursued targets in Europe enjoyed one of the strongest exchange rates in years, with the US dollar achieving parity against the euro for the first time since 2002.

The largest deals of the year all have one thing in common: They center on infrastructure assets. In the lead was the US$46.4 billion acquisition of Atlantia. Blackstone financed a take-private of the Italian infrastructure firm, taking a minority stake alongside existing majority shareholder Edizione, the investment vehicle of the Benetton family. 

The second biggest deal also involved Blackstone, which made a US$23.8 billion recapitalization of Dutch last-mile logistics real estate firm Mileway, passing an interest in the company to one of its long-term funds. In the year's third-largest deal, Brookfield Infrastructure Partners and DigitalBridge Group took a 51 percent stake in Deutsche Telekom's towers assets for US$10.7 billion.

A safe haven

Infrastructure is something of a safe haven for investors. These assets provide essential services spanning transportation, energy and water supply and distribution, through to communications and data storage. Demand for these services is typically stable, even in times of economic weakness. Many infrastructure assets are also regulated, with contract provisions tying their revenues to inflation. This is especially relevant in the current macro environment, as infrastructure delivers an attractive hedged yield.

However, in a cross-border context, the sector also sits squarely in the line of sight of Europe's national foreign direct investment (FDI) regimes. Infrastructure assets are often considered highly strategic and critical to national security.

The pandemic only tightened these regimes, and events in Ukraine further cemented this resolve. Indeed, in some instances, the scope of FDI regimes was expanded to include more sectors, covering everything from medical technology to pharma, cybersecurity and banks.

Thresholds have also been lowered and while these measures were initially considered a temporary response to pandemic-related disruption, 2022 saw some stricter regimes made permanent, as was the case in Italy and Spain.1

For deal certainty, it is essential that US acquirers develop a clear FDI roadmap that accounts for any potential obstacles and, where possible, the geopolitical intricacies involved in any proposed transaction.

ESG considerations

Naturally, this roadmap should not stop at FDI. All US bidders developing a European M&A strategy will require a sophisticated understanding of the region's progressive environmental, social and corporate governance (ESG) legislative developments. Bidders should expect to pay an ESG premium for companies that have sustainable business models, have made major progress in decarbonizing their operations, or are otherwise positioned to benefit from the concerted policymaking efforts of the European Commission and member states.

There are also capex requirements to consider, particularly with regard to highly regulated assets in the infrastructure space. These investments need to account for any short-term and long-term capital necessary, for example, to reduce companies' carbon footprints or audit and improve supply chains to meet stricter regulatory standards.

After peaking in September at a two-decade high, the dollar finally fell back below parity against the euro in Q4 2022. If this continues through 2023, there will be pressure on US bidders to continue making the most of this forex advantage in the near term while it is still available.

1 https://www.whitecase.com/insight-alert/eu-releases-its-second-annual-fdi-report-showing-increased-momentum-fdi-regulation

White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.

This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.

© 2023 White & Case LLP