Q3 Roundup: U.S. Dealmakers Lead Resurgence

U.S. M&A activity rebounded in Q3 even while international dealmaking slumped. U.S. activity surged by 35% compared to the same period 2022, when M&A was tanking. As Melissa Sawyer, global head of M&A at Sullivan & Cromwell, frames it, “we’re going to continue to see a steady flow of deals. We’re not going to see the craziness that we had in 2021. But on the other hand, I think all these predictions of the demise of M&A are overblown.”

While high interest rates and the worldwide economic slowdown cast their shadow, dealmakers found reason for optimism over the summer as fears of banking crisis contagion eased, regulatory enforcement actions were down, and the Federal Reserve began to slow its aggressive interest rate hikes.

Matterhorn’s M&A database tracks publicly-announced U.S. deals over $25 million in value, harnessing both AI and attorneys to digest the granular deal points of each transaction to allow for comparisons across industries, specific deal terms, and both legal and financial advisors.

While far from the M&A boom of 2021, many notable deals were announced, including Tapestry, Inc.’s acquisition of Capri Holdings Limited. The $8.5 billion deal combined storied fashion houses under one roof in August. The deal propelled four of the firms onto this quarter’s league table:

No stranger to the Top 5, Wachtell dominated the list this quarter, advising on 6 mega deals, including not only Capri Holdings, but also J. M. Smucker Co. on its $5.6 billion takeover of Hostess Brands, Inc..

Vinson & Elkins is new to the Top 5 list but has arrived with a bang, landing the #2 spot. Renowned for its work in the energy industry, Vinson & Elkins indeed advised on Exxon Mobil’s $4.9 billion acquisition of Denbury Inc. – but the firm also made a splash in the healthcare space when it advised Reata Pharmaceuticals, Inc. on its $7.3 billion merger with Biogen.

Sitting across from V&E on the Biogen/Reata Pharmaceuticals deal was Cravath, which jumped back on to the list this quarter at the #3 spot. Cravath advised on just two of this quarter’s mega deals, but that was enough to best Latham, which dropped from the #1 spot last quarter to #4. Latham was propelled largely by advising Tapestry, sitting across from Wachtell.

Morgan, Lewis & Bockius rounds out the list by advising Hostess, also across from Wachtell, which was everywhere in Q3.

Dealmakers are optimistic for Q4. Of the 150 M&A professionals surveyed in August, a resounding 99% forecasted further increases for the remainder of 2023. The TMT, banking, healthcare, services, and real estate industries are expected to be especially hot in the coming months.

It is all about the cash, according to Elliot Findlay, of Grant Thornton, who predicts, “Valuations are down, and corporates are sitting on a lot of cash. They’ve got the cash on the balance sheet, and ultimately they are ready to deploy to buy companies at a low or depressed values.” Law Street Media and Matterhorn will be tracking.