BMS releases latest M&A report

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

The M&A environment has felt the impact of macroeconomic developments, including the COVID-19 pandemic, the war in Ukraine, recession concerns, higher interest rates and risks related to the recent banking crisis, the report says.

Despite these challenges, private equity and corporates continue to find M&A opportunities, according to the report. While deal volume has slowed from the high levels of 2021 and early 2022, BMS remained optimistic that M&A will pick up again in the second half of 2023.

Key findings from the report included:

• Despite a challenging macroeconomic environment, the M&A insurance market in 2022 almost reached the record transaction volume of the previous year
• The appetite for growth remains in the M&A insurance market, with BMS reporting about 40% growth in insurance products purchased over the last 24 months
• Deal size over the past year has been impacted by the slowdown in M&A activity coupled with a rise in interest rates, with insurers noting a decline in average enterprise value as investors were less able to lock in high deal multiples
• A sharp rise in claims from policies written during the pre-2022 M&A boom has caused reinsurers to stoop to risk management, resulting in lower primary insurance caps and an increase in excess policies relative to insurers’ books
• There was no notable increase in distressed M&A targets as the short-term macroeconomic impact of the COVID-19 pandemic largely ends in 2022. However, the potential global recession is expected to lead to a spike in the number of bad sales this year
• The renewable energy and infrastructure sectors recorded an 8.7% increase in transaction volume in 2022 compared to the previous year
• While European M&A activity slowed in the second half of 2022, the tax insurance market saw a record number of inquiries
• Secondaries have remained active over the past year, with aggregate deal size exceeding $100 billion for the second straight year

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“We are pleased to present the latest edition of the PEMAR report,” said Tan Pawar, Head of Private Equity and M&A at BMS. “The year 2023 got off to a slow start compared to the transaction activity of the last two years. However, momentum is increasing and we have not seen any decrease in inquiries from companies looking to obtain M&A insurance. As market conditions are expected to stabilise, we should see a resurgence in transaction activity through the end of Q2 and into the second half of 2023.

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