Soaring valuations derail or delay a string of major M&A deals
Since the start of this year, rising domestic and international uncertainty has led to a series of major mergers and acquisitions being derailed or delayed. In addition to uncertainty over earnings and interest rates, the widening gap in acquisition prices amid rising share prices has been cited as a cause.
Since the start of this year, a succession of major mergers and acquisitions (M&A) deals have been called off or had their schedules postponed. Growing uncertainty over earnings and interest rates has widened disagreements between sellers and buyers over company valuations. Amid the uncertainty, some deals have been canceled or entered renegotiations just before final contracts were due to be signed.
Market conditions have coincided with a strong stock market. Cases have been reported in which the value of companies targeted for acquisition rose along with their share prices. As a result, more deals are finding it difficult to reach agreement on acquisition prices.
Geopolitical events, including wars, have increased transaction risks by affecting earnings outlooks and the course of interest rates. Changes in institutional investors’ fund flows and difficulties in raising new funds have also affected the overall M&A environment. Some funds have shown signs of reviewing existing plans.
Some deals have also encountered difficulties securing acquisition financing as the formation of new funds has been delayed. The gap between capital supply and price expectations is narrowing the window for transactions. As a result, cases in which the execution of large deals has been postponed or final agreements have fallen through have occurred in succession.
Unless regulatory factors or additional external shocks intervene, continued uncertainty of the kind seen today could lead to further changes in the progress of large deals announced in the market. However, whether each transaction closes and its financing terms should be confirmed through individual disclosures.
Sources: 매일경제 증권
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