The survey asked more than 250 CDOs across the United States for their predictions of what trends will affect the mergers and acquisitions (M&A) deal market and what pain points they will grapple with in the year ahead.

The full results and commentary from the research study are available on Riveron’s website: Corporate Development’s 2023 Deal Outlook.

Key Findings Include:

• 89% of CDOs plan to do the same or more deals in 2023, when compared to 2022
• 63% say agreeing on valuation and price will be the most difficult part of the M&A process, an increase of 50% in sentiment year-over-year
• 56% say culture clash is the top reason integrations fail
• 53% of respondents will look to divest in 2023
• 64% see the possible recession as an opportunity to acquire strategic distressed assets
• 60% are walking away from deals earlier in the process

“2023 will bring with it challenging, unpredictable economic conditions, so it’s essential for corporate development officers to be cognizant of market conditions and potential opportunities as they prepare their strategies for the year ahead,” said Josh Bier, a managing director for Riveron. “I was encouraged to see the survey respondents plan to do the same or more deals in 2023 and that the collective sentiment of CDOs indicates optimism despite ongoing uncertainty.”

Within the report, five core themes stood out to CDOs:

1. Deal appetite continues despite dynamic valuations and borrowing costs: Consistently, when asked what will drive their M&A activity in 2023, 95% of survey respondents stated their focus is on adding new capabilities, with a close second of 84% saying to increase market share.
2. Divestitures are on the horizon: The current economic environment creates opportunities for management to examine their assets and operations in detail.
3. Protecting value requires solving the culture-fit dilemma: Culture is often overlooked as a critical success element to the overall merger integration—perhaps because factors that comprise company culture are often intangible such as occasional perks, leaders’ personalities, or the collectively perceived mood of meetings.
4. Sidelined for now, ESG will only grow in importance: In the next two years, it is likely that mature ESG programs will help shape the due diligence process and priorities along with regulatory changes, shifts in investor priorities, and approaching supply chain considerations.
5. At the core, it’s about relationships: In the 2020 CDO Forum study, CDOs attributed 38% of their acquisitions to the competitive process and 62% to relationship-cultivated, as compared to 51% and 49%, respectively, in the 2023 survey.