Mergers and Acquisitions: 2022 a big year driven by digital and data
The intensive demand for digital and data-driven businesses will probably mean “another supercharged year” for mergers and acquisitions (M&A), consultancy PwC forecasts in a report about M&A trends for 2022.
A warning is that higher interest rates, rising inflation, increased taxes and greater regulation could pose structural or financial hurdles.
“2021 noted an unparalleled growth in deal values and volumes after record fundraising, highlighting “that there is plenty more capital for M&A to come in 20212”.
PwC warns that higher interest rates, rising inflation, increased taxes and greater regulation could pose structural or financial hurdles for completing deals in 2022.
“M&A activity in 2021 was fueled in large measure by intense demand for digital and data-driven assets, and we believe technology adaptation will remain a consistent pressure across all industries in 2022”, says Brian Levy, Global Deals Industries Leader, Partner, PwC US.
”Companies will also seek to maintain competitive advantage and reinvest using divestitures of under-performing businesses. At the same time, dealmakers must pay close attention to potential deal disruptors such as financial market volatility and macroeconomic headwinds. The need to have robust plans for M&A value creation will be extremely important this year.”
The report expects that ”the strategic shift to digital, innovative and new disruptive business models to continue to drive M&A decision-making.”
”With market conditions that demand a greater value creation mindset across global boardrooms, CEOs will also likely focus on divestitures, as they rebalance their portfolios for longer term growth and profitability. Environmental, social and governance (ESG) factors will also increasingly influence M&A strategies throughout 2022.”
The report shows 2021 was a record year for M&A in both volume and value. The number of announced deals exceeded 62,000 globally in 2021, up 24% from 2020. Publicly disclosed deal values reached all-time highs of USD 5.1 trillion
Levy predicts that dealmaking will likely remain robust in 2022, with fierce competition among corporates “but it’s feasible that the top may come off the market, given increasing macroeconomic and regulatory headwinds.”
”We are already seeing greater volatility in financial markets, further disruptions in the global supply chains, and increased levels of fiscal debt, as shockwaves from the pandemic continue to play out globally. As we’ve already learned from the pandemic, dealmakers should stay alert to how the new accelerated pace of change can bring these factors – or others – into play earlier and with greater impact.”
Trends:
- Consumer markets: Consumer preferences will continue to serve as a catalyst for M&A activity in 2022 as corporates and PE remake their portfolios to capitalize on trends such as ‘conscious consumerism’ which are creating demand for new products and services and entirely new business models.
- Energy, utilities and resources (EU&R): ESG is driving strategies across the industry. M&A will be used to rebalance portfolios and pursue value creation opportunities in ESG growth areas such as renewables, carbon capture, battery storage, hydrogen, transmission infrastructure and other clean technologies.
- Financial services: Competition for strategic market advantage continues to fuel M&A, with activity led by deals for technology and innovation. Expect continued portfolio optimisation to lead to divestiture activity along with capability-driven deals as companies seek to leverage technology and drive efficiencies. Distressed assets in the banking and insurance sectors could produce a wave of deals.
- Health industries: Pharma companies are seeking to optimise their portfolios for growth through deals that provide access to new technologies such as mRNA and cell and gene therapy. In healthcare services, speciality care platforms, telehealth, healthtech and data and analytics companies are attracting investor interest.
- Industrial manufacturing and automotive: Strategic portfolio reviews and ESG are driving M&A activity – in particular, deals that accelerate digital transformation such as electric and autonomous vehicles, batteries and charging technologies, additive manufacturing, next-generation materials, and production with non-fossil energy sources.
- Technology, media and telecommunications: As traditional industries face high levels of disruption and innovative technologies propel into the mainstream faster than anticipated, the technology sector will continue to see unmatched levels of deals activity—and deal values—as companies from across all industries seek to acquire key technology or digital capabilities.
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