Global M&A fails to impress in the third quarter

Q3 dealmaking reflected multiple downward pressures on the market, including rising inflation, stock market volatility, and the spiralling European energy crisis

Following on from two robust first quarters, global M&A activity succumbed to prolonged market uncertainty in the third quarter. A total of 5,163 deals worth a total of US$731.3 billion changed hands during the quarter. Both volume and value totals were the lowest they've been since Q2 2020—a time when the impact of the COVID-19 pandemic was first being felt by the global deal market.

Skyward valuations spark towers deals

Despite this lull in activity, sectors which have historically been hotbeds for M&A continue to drive dealmaking. TMT remains the most active sector globally, both in terms of volume and value, with a total of 1,256 deals worth US$179.3 billion announced in Q3.

An upward trend in towers valuations was the reason behind Deutsche Telekom’s sale of a 51 percent stake in its towers business, GD Towers, to Canadian investor Brookfield asset management and US private equity group DigitalBridge. The deal, valued at US$10.7 billion, will deliver significant value to Deutsche Telekom’s stakeholders, while still enabling the German telco firm to retain value through its remaining 49% stake.

Deutsche Telekom’s move to monetize on its tower infrastructure assets follows other telco industry leaders who have witnessed their valuations trend downwards. Orange, for example, recently formed a separate mobile towers unit called Totem, while Vodafone has spun out its towers business into Vantage Towers. Both companies are reportedly exploring options of third party transactions to try to maximize the value of these businesses.

GSK demerger fails to impress

While the TMT sector was the most active in Q3, the highest valued deal of the year—UK drugmaker GlaxoSmithKline’s spin-off of its consumer healthcare joint venture Haleon—took place within the consumer sector.

GSK, which has been under activist pressure to deliver a more productive drug pipeline, plans to spend its spin-off proceeds on research and development, along with pursuing acquisition opportunities.

Despite the spin-off deal—which saw Haleon list on the London Stock Exchange in July—being the largest London debut since Glencore in 2011, a valuation of about US$36.4 billion failed to impress the market. This underperformance was attributed to various factors, including stock market volatility, the war in Ukraine, and rising inflation putting downward pressure on retail and consumer stocks.

Energy crisis spurs government deals

Rising energy prices across Europe have forced governments across the continent to act. This trend resulted in some significant energy deals taking place in Q3, including the French government’s acquisition of the remaining stake in EDF, announced in July. The deal will see the French energy giant being fully nationalized and comes at a time when the government is putting in place political measures to shield consumers from energy price rises.

The US$9.8 billion deal, which will give the government control of the country’s biggest nuclear power operator, is part of its aim to build energy sovereignty at a time of increasing geopolitical conflict—a move which is seen as key to achieving its carbon reduction goals.

Similarly, the German government announced in late September that it would nationalize utilities firm Uniper in a US$14.2 billion deal—this came after the government stepped in to recapitalize the struggling firm in July.


While global M&A started the year on a relatively strong footing, growing macroeconomic challenges are becoming impossible to ignore.

Rising inflation, in particular, are beginning to have a tangible impact on the global deal market, with many countries facing 40-year records. Inflation in the US and Eurozone climbed to over 8 percent by mid-2022, with this environment expected to persist through the remainder of the year. Higher interest rates which have been brought in by central banks to cool rising prices will mean costlier financing for deals.

Market uncertainty surrounding deals will persist, with the energy sector particularly vulnerable—although activity in the renewables sector, in Asia especially, looks very promising going forward. More restructuring and turnaround deals among energy firms could be on the cards as firms look to recover their losses.

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