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Where Have All the Deals Gone?

Across the country, wages are dropping, work is harder to come by and people are worried about their financial future.

Wall Street, New York City (Sophie Backes / Unsplash)

Across the country, wages are dropping, work is harder to come by and people are worried about their financial future. Investment-banking Americans and corporate lawyers are wondering how much more their pay will be cut and how they are going to afford their mortgages.

If you haven’t been following it, here’s the state of things for some of the most unsympathetic characters in the global economy: pay for partners at the top US law firms is down and on Wall St., the average bonus – which makes up an outsized portion of annual pay – fell almost 30% last year and looks set to continue its tumble this year.

The culprit is the plummeting deal volume. M&A fell off a cliff at the end of last year and has stayed dismally slow since.

And that’s the topic of the latest episode of The Closer Weekly.

The financial press has been reporting on a big trend in dealmaking: it's way down this year, especially in comparison to the M&A activity of 2021. Aimee and Ben discuss the winners and losers of this new environment, and what it might mean for the types of deals to expect in the months to come.

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Why is dealmaking slowing so dramatically? Well, rising interest rates and fears that those rising interest rates could send the U.S. economy into a recession are spooking executives.

But that’s only only part of the story. The precipitous drop off in M&A volume is also yet another case of the pandemic throwing off our barometer of what’s normal: from 2014 up to the pandemic, global M&A volume pretty much hummed along at between $3.25 and $4.25 trillion a year. But then, 2021 rolled along, the economy was flush with fiscal stimulus, inflation hadn’t entrenched itself and dealmaking took off, spiking more than 60% to $5.7 trillion.

That’s the context in which the very pre-pandemic normal of $3.6 trillion in annual deal volume looks like such a drop-off.

Everyone is just taking a bit of time to re-adjust to the new old-normal.

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