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THE MOMENTUM CONTINUES 2022 M&A OUTLOOK A LOOK BACK 2021 WAS A RECORD YEAR FOR M&A 2021 saw the highest total deal value in history, topping more than $5 trillion Strategic M&A is reaching its highest value in 6 years In nearly all sectors, strategic M&A multiples are at an all-time high 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2016 2017 2018 2019 2020 2021 400 600 800 1,000 1,200 1,400 1,600 200 0 0 NUMBER OF DEALSVALUE OF DEALS US$BNNUMBER OF DEALS VALUE OF DEALS US$BN GLOBAL M&A ACTIVITY - QUARTERLY DATA FROM MERGERMARKET A GLIMPSE OF THE ROAD AHEAD 64% of 300 top dealmakers believe that M&A activity will increase in the next year 2022 IS EXPECTED TO CONTINUE ON A DEAL-MAKING COURSE DUE TO: Concerns around changing fiscal policy & regulations Ongoing supply chain issues Competition from investors sitting on a ton of dry powder Global economic growth ACQUISITIONS ARE EXPECTED TO FOCUS ON: Technology needed by non-tech companies to improve digitalization & cybersecurity Purchases that help to diversify or improve supply chains Bolstering data analytics capabilities Healthcare solutions that improve the efficiency of care Financial tech solutions such as digital banking and payments IMPACTFUL GLOBAL ECONOMIC POLICIES INCLUDE: Infrastructure plans in the U.S. to allocate trillions of dollars to a range of priorities The EU Recovery Bill and Green Bill focusing on research and innovation, digitization, modernization and recovery Tightening monetary policy in Latin America and varying fiscal support in Asia INTEREST RATES ARE EXPECTED TO RISE IN THE US: The Federal Reserve projects three rate hikes in 2022 Three more increases are foreseen for 2023 Two more increases are foreseen for 2024, pushing the rate to 2.1% by the end of 2024 The more interest rates rise, more pressure on the cost of capital will be on multiples, and they will start to decrease THE TECHNOLOGY SECTOR November 2021 saw the highest sector deal announcement and the most aggregate technology deal values In almost every week of 2021, private equity announced a technology transaction over $1 billion 78% 57% 22% Notable Optimism of 300 global dealmakers expect M&A tech deal volumes to increase through the first half of 2022 expect average values to increase identified a need to scale to ‘increase competitiveness’ as the leading factor driving their M&A strategy of corporate respondents are considering a SPAC transaction in 2022 of private equity respondents are looking to close a SPAC transaction in 2022 Eyes on SPACs 49% 57% of private equity respondents prefer high-growth companies of corporate respondents favor high-growth companies would prefer to acquire mature companies that are over five years old Targeting High Growth 75% 46% 26% THE HEALTHCARE & MEDTECH SECTORS In 2021, there were 2,304 deals worth a $624.6 billion Physician medical groups saw more than 400 deals Hospitals saw more megamergers in Q4 of 2021 Biotech acquisitions in the $5-15 billion range are expected through 2022 as companies try to fill gaps in future pipelines The medical device sector saw $85 billion in deals in 2021, activity that’s expected to continue In 2022, deals could face more scrutiny and longer review times from regulatory agencies Healthcare M&A surged in 2021, growing 56% from November of 2020 TRENDS DRIVING DEALS IN 2022 Deal activity among government and health plans in the US More deals in the home care market More deals in behavioral care Systems investing in manufacturers to ensure continuity in resource and income flows amid supply chain issues Health systems continuing to expand to capture more of the care continuum Digital health consolidation impacting patient engagement dynamics THE MEDTECH SURGE Deals in the medtech space have also hit record levels The first half of 2021 alone reached a combined $31.5 billion in value Players in the space will continue to focus on rapid and highly competitive growth strategies THE MEDIA & TELECOM SECTOR That’s a 27% increase over the previous year The value of deals in the sector totaled a record $233 billion Dealmakers expect 2022 to sustain a high level of M&A deal volume 804 deals were announced in the media & telecom industries in 2021 TRENDS DRIVING DEALS IN 2022 Strong demand for content Scaling up for competitiveness Digital disruption Online gambling leading to more buyout targets in sports data, content providers, and gaming and app developers Deals targeting artificial intelligence, virtual reality, augmented reality and connective hardware Continued rollout of 5G technology and growing residential broadband availability A return to the big screen THE INDUSTRIALS & CHEMICALS SECTOR INDUSTRIALS REBOUNDING Deal volume in 2H of 2021 outpaced the first half, showing growing momentum Deals exceeding $1 billion increased over the same period There was a spike in 2021 M&A deals in industrial manufacturing, with deal value up by 50% over 2020 CHEMICALS ON THE RISE Chemicals M&A deal volume and value rebounded strongly in Q2 of 2021 Deal value in Q3 of 2021 surpassed total value of the first half of the year due to several megadeals Chemicals company executives are growing more optimistic and willing to position capital for growth Chemicals M&A activity is expected continue to be strong in 2022 Private equity is more involved than ever in chemicals M&A deals, with new companies engaging in transactions TRENDS DRIVING DEALS IN 2022 Optimizing portfolios and divesting Investing in growth Increasing flexibility and security Extracting value Digital transformation Sustainability efforts Continued antimicrobial demand THE AUTOMOTIVE SECTOR Semiconductor availability should start to increase through the year Global car sales are expected to rise but are likely to remain about 6% below pre-pandemic levels In 2021, auto manufacturers comprised 45% of deal value, at $61.3 billion, primarily due to SPAC deals and other investments in new-energy vehicles (NEV) Investments in NEV were strong in 2021 across all segments, and are expected to drive further M&A in 2022 Global conditions are expected to improve in 2022 as demand and supply chain challenges ease TRENDS DRIVING DEALS IN 2022 New tech & new capital will continue to jumpstart M&A in the auto industry As ride-sharing downtrends, a new wave of car buyers is anticipated in 2022 Increasing consumer adoption of e-commerce will drive investment by dealers in: Online sales platforms Contactless payment Vehicle delivery Companies may seek M&A to avoid future supply chain problems by improving inventory through new regions or supply chain networks THE POWER & UTILITIES SECTOR Financial players accounted for 62% of the total deal value, up from 28% in 2020 Corporate deals dominated the space, accounting for 78% of total deal value Renewable deals contributed largely to deal activity, with 29% of total deal value In the last year, the sector saw a boost in deal value, up 3% from 2020 TRENDS DRIVING DEALS IN 2022 Legislative, regulatory and corporate policy focusing on de-carbonization and clean investments Increasing ESG efforts in the areas of climate change, social justice, equality and diversity An abundant availability of capital A competitive market for individual asset classes Digitalization & decentralization Resiliency planning strategies amid increasing severe weather events Improving electrical grids PRIVATE EQUITY Firms increased their role in transaction value in 2021 by more than 55% PE and venture capital firms globally raised about $1 trillion through December 21, 2021. That’s up 35% from the end of 2020 The first three quarters of 2021 saw PE firms involved in 6,441 deals worldwide, valued at $1.6 trillion TRENDS DRIVING DEALS IN 2022 Possible hikes in corporate capital gains taxes The possible raising of interest rates, which will drive up borrowing costs Economic recovery from the COVID-19 pandemic THE LABOR SHORTAGE 30% 36% 49% During the height of the pandemic, acquiring talent as a reason to buy a business rose to of workers who quit their jobs in 2021 did so without another job lined up of business owners say the labor shortage is affecting their business Widespread talent shortages will continue to drive M&A deals in 2022 The growing trend known as “acquihiring” will continue—the hiring of skilled labor from other companies through M&A Businesses are seeking automation to address labor shortages, which is a driver for M&A to gain more advanced technology SUSTAINABILITY Support is growing from all stakeholders for changes to environmental footprints Investors tend to consider sustainable businesses more adaptable to market shifts Environmental, social and governance (ESG) issues will also continue to remain in the spotlight Sustainability initiatives are also among the motivating factors behind more M&A transactions across industries ABOUT BENCHMARK INTERNATIONAL Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $8B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 14 offices across the world, have assisted thousands of owners with achieving their personal objectives and ensuring the continued growth of their businesses. BENCHMARKINTL.COM DATA FROM MERGERMARKET & U.S. CENSUS BUREAU
