Mélody Brunot, Corporate Counsel and Axelle Ferey, COO Photo: DLA Piper

Mélody Brunot, Corporate Counsel and Axelle Ferey, COO Photo: DLA Piper

In a recent podcast, Axelle Ferey, COO, and Mélody Brunot, Corporate Counsel, both from DLA Piper in Luxembourg, offered valuable insights into the macro-economic climate's impact on the Mergers and Acquisitions (M&A) landscape, both globally and in Luxembourg. This podcast serves as a supplement to DLA Piper's 2023 Global M&A report, analyzing approximately 800 private M&A deals in 2022. Here are the key takeaways from their interview.

The End of The Great Moderation: Entering an Era of Uncertainty

The year 2022 marked the end of a 40-year period known as "The Great Moderation," characterized by stable growth and low inflation. During this period driven by high demand, policymakers used traditional levers to manage economic stability without putting economic growth at risk. This time is over. The new era of uncertainty is characterized by inflationary pressures, increased funding costs, slow growth, and escalating trade tensions between East and West.

Resilience of the M&A Market in 2022

Despite the challenging economic and geopolitical environment, the M&A market remained active in 2022. Private equity players expedited their exits to capitalize on gains, creating opportunities for strategic international buyers. Although global deal volumes decreased in 2022 after a record-breaking 2021, they still remained above pre-pandemic levels, showcasing a robust performance.

ESG in the Investment World

ESG (Environmental, Social, and Governance) considerations are increasingly becoming a crucial part of the M&A transactional process. Conducting thorough ESG due diligence is essential to identify and mitigate potential risks associated with failing to meet stakeholders' expectations, business disruption, and inheriting ESG exposure and liabilities.

Understanding the Luxembourg Market

Luxembourg, being a specific country, has an active but small M&A market, particularly in the financial services sector. It serves as a multi-sectoral investment platform, attracting PE structures and holding companies. The drive for consolidation in the financial and insurance sectors adds to the market's attractiveness.

Despite remaining challenges and a fierce competitive landscape, Luxembourg remains an attractive destination for Foreign Direct Investments. with a notable increase between 2021 and 2022, particularly in sustainable finance and sustainable investments. It stands as one of the main global financial centers for sustainable finance.

Drivers of Successful M&A in 2023

Despite the challenging economic environment, strategic M&A opportunities exist. Companies with significant cash reserves are expected to make strategic moves. When there is a compelling case, companies will continue to merge, acquire, and divest, even in a subdued economic environment.

More than ever, to achieve successful M&A deals in the 2023 volatile environment, companies need a strategic vision, the right network to get direct access to the best opportunities early on, thorough due diligence including an ESG one, and fast decision-making process.

To conclude

The M&A landscape in Luxembourg is evolving amidst economic uncertainties and geopolitical tensions. The market has demonstrated resilience, with strategic players actively seeking growth opportunities. Understanding local market practices and incorporating ESG considerations are becoming crucial for successful transactions. While challenges lie ahead, companies equipped with strategic vision and disciplined approaches can capitalize on opportunities in this dynamic landscape.

For those interested in the complete interview, the podcast is available on and . Join Axelle and Mélody as they unravel the M&A landscape in Luxembourg in just 15 minutes.