North America Is on a Fast Track of M&A Activity25 January 2022
ESG, digitization are in the driver’s seat.
Mergers and acquisitions (M&A) deal activity has the momentum of a runaway train right now in the U.S., and there are no signs of a slowdown. Lower borrowing rates and access to cheap capital have been the driving factors after concerns on a changing tax policy influenced deals early last year.
Additionally, with many institutional investors signing on to climate-action pledges — and environmental, social and corporate governance (ESG) being top-of-mind across the board — dealmakers are spending additional time on ESG diligence to ensure targets align with their commitment to stakeholders and global initiatives.
As we all know, right now it's a highly competitive landscape for qualified assets. Unprecedented levels of capital on the sidelines have forced investors to widen their mandates and risk tolerances in search of yield. Multiples are at record highs as companies enter new markets and are willing to pay premiums as they do so. With that entry into new market territory, there are few industries not embracing M&A.
COVID-19 has proven the need for digital transformation, so we can expect to see Tech continuing to drive M&A activity as we saw in Microsoft's pending USD 68.7 billion acquisition of Activision Blizzard announced this month.
In that same vein, many believe we will see more consolidation and spinoffs in the Consumer sector as traditional Retail tries to figure out e-commerce and reinvent itself.
In the new SS&C Intralinks Deal Flow Predictor for Q1 2022, you can find in-depth information on key sectors and their trends. (The report is independently verified as a highly accurate six-month forecast of M&A, compiled by tracking early-stage M&A transactions globally that are in preparation or have begun due diligence.)
As firms set out to solve supply-chain problems, logistics companies will be eager to add tech-enabled companies to improve efficiencies — and manufacturers will likely seek investments to build their digital and forecasting capabilities.
Healthcare has been seen as a stable sector and the pandemic has accelerated its digitization. The companies that will continue to attract interest from investors will be the ones across Life Sciences, Pharma and related services sectors that are disruptive and, of course, tech-enabled.
IPO activity remains strong. However, the special purpose acquisition company (SPACs) fad has faded. The volume of investors looking to enter public markets via a SPAC and through SPAC fundraising has dropped off last year's highs.
Overall, North American clients are optimistic that M&A activity will remain strong through 2022. While there will never be a hard stop, they are wondering when a slowdown will hit.
The energy for M&A isn't without challenges. Any company impacted by supply-chain issues has seen its organic growth muted, making for a hard sell to a new equity partner. Also, lower multiples have led many to pause or postpone efforts unless they can tell a compelling story pointing to the factors causing the slowdown.
There is also massive deal fatigue. Perhaps this is an embarrassment of riches. After all, the market has been on fire since June 2020 and dealmakers have evaluated and closed more deals than ever. There’s never been a better time to be an M&A dealmaker.
Hannah Schwartz is a senior account executive at Intralinks. She joined in 2016 with an initial focus on boutique, middle market and bulge bracket advisory firms in both the San Francisco and Chicago offices. Hannah currently supports corporates throughout the Midwest, enabling and securing the flow of information to successfully streamline complex strategic transactions, including, mergers and acquisitions, capital raising and investor reporting.
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