BMS releases report on M&A trends

Independent specialist insurance and reinsurance broker BMS has released the latest edition of its Private Equity, M&A and Tax (PEMAT) report. The report analyses trends from 2022 and provides an outlook for 2023 for the North American, European and Asian M&A markets.

The M&A environment has felt the impacts of macro developments including the COVID-19 pandemic, the Ukraine war, concerns about recession, higher interest rates, and risks associated with the recent banking crisis, the report found.

Despite these challenges, private equity and corporates continue to find M&A opportunities, according to the report. While deal volumes have fallen from the high levels seen in 2021 and early 2022, BMS remained optimistic that M&A would see a resurgence toward the latter half of 2023.

Key findings of the report included:

• Despite a challenging macroeconomic environment, the M&A insurance market in 2022 nearly matched the record-breaking deal volume of the previous year
• Growth appetite remains in the M&A insurance market, with BMS seeing approximately 40% growth in insurance products purchased over the past 24 months
• Deal size last year was impacted by the slowdown in M&A activity combined with a rise in interest rate, with insurers noting a reduction in average enterprise value as investors became less able to commit to high deal multiples
• A significant rise in claims from policies underwritten during the pre-2022 M&A boom has resulted in reinsurers buckling down on managing risk, spurring lower primary policy limits and an increase in excess policies as a proportion of insurers’ books
• There was no notable rise in distressed M&A targets, with the short-term macroeconomic impact of the COVID-19 pandemic largely ending in 2022. However, potential global recession this year is expected to spur an increase in the number of distressed sales
• Renewables and infrastructure sectors saw an 8.7% increase in deal volume in 2022 compared to the prior year
• While European M&A activity tapered off in the second half of 2022, the tax insurance market posted a record number of inquiries
• Secondaries remained active last year, with total transaction volume surpassing $100 billion for the second year running

“We are delighted to bring you the latest edition of the PEMAR report,” said Tan Pawar, head of private equity and M&A at BMS. “2023 has gotten off to a subdued start compared to the deal activity levels seen over the past two years. However, momentum is growing, and we have not seen a decrease in inquiries from companies eager to obtain M&A insurance. With market conditions expected to stabilise, we should see a resurgence in deal activity by the end of Q2 and into the second half of 2023.

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