Finance, Restructuring & Tax

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egadeals involving the world’s biggest companies may hog the headlines, but as a bellwether for the overall state of the M&A market in 2023, you could do worse than examine the mid-cap segment. Mid-market M&A is currently enjoying a higher-than-average level of interest, a knock on effect of the cautious mood of the investment community, whose enthusiasm for big-ticket M&A has been dampened by rising interest rates and fears that global economy may be on the precipice of recession. Mid-cap companies are often seen as a safe investment bet, carrying less risk and more potential upsides. According to the not-for-profit Wespath, small- and mid-cap companies tend to participate in less mature, more innovative and faster-growing industries—such as biotech, robotics or specialized software, which have the potential for higher growth, compared to large cap equities such as those in the consumer or telecoms sectors.

As financing became more difficult over the past 12 months, M&A activity placed more emphasis on alternative funding and how to create value from a deal, which led to a greater focus on strategic repositioning through portfolio optimization, digitalization and business model changes. Both corporates and private equity firms moved to acquire new businesses to achieve their aims. Despite the impressive performance of the mid-cap sector, the first half of the year was challenging, with deal volumes for the market as a whole down 4% compared to the same period in 2022. This, nevertheless, remained above pre-pandemic levels, with an expected uptick in restructuring and distressed M&A, helping limit the damage.

But a lot changed with the onset of summer: inflation decelerated and there were strong indications that interest rates had finally topped out. In August, the US Federal Reserve expressed the belief that US interest rates had peaked at 5.5%, which nevertheless represented their highest level since 2001. The resilient state of the US economy points to a more buoyant global M&A market in the coming months. More generally speaking, companies are increasingly looking to reduce their impact on the environment, with many pursuing a net-zero strategy. Energy efficiency, green tax credits, sustainable financing and the energy transition are creating a huge amount of disruption in some sectors, providing opportunities for the canny investor. Automotive and industrial OEMs have begun acquiring raw material companies to secure the supply of minerals critical to battery production and energy storage, for example. Our guide recaps some key topics of the year, and features exclusive interviews with leaders, numerous rankings of leading law firms, investors, investment banks and consultancies worldwide. The classification per country will help you to find the right firm, and support your growth and new deals.