Surging valuations derail or delay a string of major M&A deals
Since the start of this year, uncertainty at home and abroad and rising share prices have pushed up the valuations of acquisition targets, leading to a string of major mergers and acquisitions (M&A) deals being derailed or delayed. As funds from mutual aid associations have shifted into the stock market and it has become difficult to establish new funds, the financing and consensus needed to complete deals have become harder to secure.
Since the start of this year, a string of major M&A deals have been derailed or delayed. The widening disagreement between buyers and sellers over company valuations is seen as a primary reason. Some planned megadeals have reached the stage of considering renegotiation or withdrawal.
Rising share prices have pushed up the valuations of acquisition targets, making deals harder to complete. High valuations have created a gap between the prices offered by buyers and the expectations of sellers. Further negotiations are continuing to narrow that gap.
Geopolitical uncertainty, including wars, as well as uncertainty over earnings and interest rates have also had an impact. As earnings volatility has increased, more cases have emerged in which risks are reassessed during the acquisition review process. Interest rate movements have directly affected the cost of raising large amounts of leverage.
Changes in the flow of funds from mutual aid associations and other institutional investors have also altered the trading environment. As some mutual aid association funds shifted into stock market investments, the capital contributions expected by private equity funds and buyers declined. The reduction in capital commitments is disrupting the financing of deals requiring large sums.
New fund formation is also continuing to face difficulties. Delays in raising funds from investors have left some of the planned acquisition financing unsecured. Delays in fund formation are leading to postponed acquisition schedules or changes to deal structures.
As a result, dealmaking across the M&A market is slowing. Some transactions have entered a phase of price renegotiation or suspension. Cases are being reported in which expectations of completing deals within the year, as originally planned, are diminishing.
The industry is seeing efforts to reassess deal structures and financing terms. Both buyers and sellers are revising negotiation terms or increasing requests for additional due diligence. Future performance and interest rate trends are expected to be important factors in whether transactions resume.
Sources: 매일경제 증권
Bullstory synthesized this report from the linked sources. AI may have assisted the writing process. Check the original reports for factual confirmation.