In the first half of 2020 the M&A community expected a wave of insolvencies, with distressed restructuring advisers preparing for an extremely busy year, neither of which materialised. In fact, 2021 was the biggest year on record for M&A with $5 trillion worth of deals done globally¹.
Ultimately, the varying degrees of government support worked. A combination of furlough schemes, quantitative easing, continuation of almost zero (and in some places negative) interest rates and historically high levels of dry powder in the PE community meant listed equities reached new highs, private deals enjoyed record multiples and there was immediate rebound in employment figures. However, the stimulus had to come to an end, and with it a much anticipated correction.
2022 saw the highest inflation in 30 years1 and dramatic increases in interest rates as a counter measure. The impact has been that equities and bond markets have lost more than $30 trillion in value in 2022, with the rise in interest rates having a significant impact on balance sheets, capital investments, M&A as well as the day to day cost of refinancing. This is now feeding through to UK insolvencies; “The number of insolvencies in Q3 2022 increased by 40% year-on-year compared to Q3 2021, as businesses weather increasingly challenging economic conditions. There were 5,595 company insolvencies in Q3 2022. Small businesses account for the overwhelming majority of these insolvencies. During 2022, there were only 104 insolvencies of businesses with turnover of more than £10m.”2
The M&A and Tax insurance market remains well placed to provide solutions to wrap around a significant variation of deal dynamics, beyond the traditional disposal process.
This article sets out further information on how M&A solutions may assist with complex, distressed dynamics.