Mergers and acquisitions (M&A) activity reached an all-time high in 2021, eclipsing prior records by $1 trillion. This was fueled by an abundance of investment capital, revamped corporate strategies and private equity investors again at the forefront of deal activity. The technology sector took center stage, as companies across industries continued to navigate digital disruption and increasing pressure from stakeholders to unlock value in their companies and portfolios.
Many drivers of the M&A activity over the past year have even further to run, and companies across sectors continue to seek scale and focus while repositioning themselves to capture growth. The imperatives for deal making — including digital transformation — have strengthened, and the supply of capital, not least from private equity and SPACs, is plentiful. A recent survey of nearly 400 global private equity investors, confirmed that deploying capital remains a top priority in 2022.
This, however, is not to downplay the significant risks the market still faces. Uncertainty related to the conflict in Ukraine and ongoing geopolitical events may dampen dealmaking, particularly in Europe. Questions around potential exposure to Russia as well as general market sentiment could impact investor appetite for M&A. In parallel, increased regulatory scrutiny, alongside the rising cost of energy, supply chain challenges and inflation remaining at multi-year highs are all likely to create some headwinds. Corporates as well as investors face additional challenges from lofty valuations, the war for talent, deal complexity and fierce competition for high-quality assets.
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