Dealmaking booms when markets are stable and businesses are feeling good about the economy and access to financing. When conditions deteriorate, confidence flags, and the number of companies going public or pursuing takeovers drops. That’s what is happening now.
Details, details: The number of global initial public offerings, or IPOs, has dropped by 54% so far this year compared to 2021, according to data from Dealogic provided to Before the Bell. Mergers and acquisitions have plunged by 25%.
The drop-off comes as central banks around the world hike interest rates, leading to higher borrowing costs and tighter financial conditions. Decades-high inflation is also feeding recession fears as consumers begin to deplete their pandemic-era savings, roiling markets and generating questions about how long the economic recovery can last.
In this environment, companies that had wanted to execute IPOs or sell their businesses are staying on the sidelines — preferring to wait for a market recovery when they could raise more money from investors.