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The first quarter of 2023 has seen the global mergers and acquisitions (M&A) market slump to its lowest level in more than a decade, with the total value of globally announced M&A deals standing at just $580bn, a 44% drop compared to the same period last year, according to data from Refinitiv. The first quarter also saw a 23% drop compared to the last quarter of 2022. Last year, M&A activity reached $3.6tn, a 37% decline compared to a record-breaking 2021.
Several factors have contributed to the decline in M&A activity, including rising interest rates, high inflation, and fears of a global recession. As a result, many companies have reduced their appetites for dealmaking. This is reflected in Refinitiv’s US and international law firm rankings and the share of deals they advised on last quarter.
New York-based Simpson, Thacher & Bartlett saw a 72% drop in the value of globally announced deals for which it served as the principal advisor compared to the first quarter of last year. Its value of deals was down to $37bn from $134bn. The firm, which led the full-year rankings by deal value for 2022, ranked seventh among principal advisors for the most recent quarter.
Chicago-based Kirkland & Ellis was ranked second as principal advisor for the first quarter but saw a similar drop in value. During the first quarter of 2022, the firm served as the principal advisor on $117bn worth of deals, compared to $58bn this past quarter, a nearly 50% decrease. Kirkland expanded its lawyer ranks in 2021 and into 2022 before the retreat in global dealmaking gained steam. Like other firms, Kirkland has since trimmed its ranks, making an unspecified number of cuts this week that it described as a result of “performance-based decisions.”
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Other firms that have cut jobs since late last year due to a slowdown in work include Cooley, Goodwin Procter, and Stroock & Stroock & Lavan.
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Despite the downturn, some firms outperformed themselves compared to last year. New York-based Wachtell, Lipton, Rosen & Katz earned Refinitiv’s top principal advisor ranking for the first quarter by deal value and worked on $84bn worth of deals compared to $51bn in Q1 2022.
Boston-based Goodwin continued advising on the most M&A deals in any given quarter, even though the value of those deals dropped. Between January 1 and March 31, Goodwin lawyers served as principal advisers on 170 announced global deals worth $32bn. During the same period last year, Goodwin worked on 294 deals worth $51bn.
The downturn in M&A activity is expected to continue in the short term as companies continue to focus on cash preservation and uncertainty around global economic conditions persists. However, some experts believe that the market will eventually recover, particularly as the COVID-19 pandemic is controlled and businesses start gaining more confidence. In the meantime, law firms must adapt to the changing market conditions and focus on other practice areas, such as restructuring and insolvency.
