Report: M&A Value at Lowest Level Since 2009

Steep inflation, a volatile market and rising interest rates have led many companies to put their acquisition plans on hold.

The value of worldwide mergers and acquisitions announced by companies dropped 34% in the first nine months of the year, to $2.81 trillion, The Wall Street Journal (WSJ) reported Monday (Oct. 10), citing data from Refinitv.

The report says this is the largest drop in mergers and acquisition (M&A) values since 2009, when that number fell 42% thanks to the global financial crisis. Deals fell across global markets: a 40% decline for sellers based in the Americas and a 24% decrease in Europe, Refinitiv said.

According to the WSJ report, many companies say they have begun to hold off on M&As until they have a better idea of the economy’s outlook, even as valuations have fallen and the strength of the dollar against most major currencies gives U.S. buyers more purchasing power to buy up targets overseas.

Read more: Strong Dollar Makes UK Businesses Vulnerable to Takeovers

PYMNTS reported on this phenomenon last week, after a leader in the London financial sector expressed worry that U.K. companies are vulnerable to being taken over by foreign entities taking advantage of both a weak British pound and overall weakness in equity markets.

Ross Mitchinson, co-chief executive of U.K. brokerage and investment bank Numis, told the Financial Times that businesses are being targeted for acquisition.

“M&A is being driven by U.K. companies being bid for by overseas companies getting the double benefit of weakened sterling and lowly valued equity markets,” he said.

Mitchinson also noted that private equity funds are using more equity than typical to fund deals as borrowing is difficult. However, he noted that investors will replace their equity with debt once lending begins to ease.

“They can refinance these deals with debt when the market reopens,” he continued. “Sadly, the U.K. is having more companies leave the market than join.”