Podcast: Report Reveals 300 Global M&A Dealmakers' Sentiment on Future Deal Environment

The Real Deal Podcast

This week, we discuss the key findings from SS&C Intralinks’ Global M&A Dealmakers Report 2022. Joining host Julie-Anna Needham are Nick Cheek, editor at Acuris Studios, and Matthew Wells, vice president for product marketing at SS&C Intralinks. Dealcast is presented by Mergermarket and SS&C Intralinks.

Download the report here.

In this episode, you'll learn about:

  • Key learnings from a survey of 300 global dealmakers
  • The main drivers for M&A in the coming year
  • How dealmakers can keep up with ever-changing tech trends


[MUSIC PLAYING] JULIE-ANNA NEEDHAM: Welcome to Dealcast, the weekly M&A podcast presented to you by Mergermarket and SS&C Intralinks. I'm Julie-Anna Needham, a business journalist who's been covering M&A for a decade. In this special episode, we're discussing the findings of SS&C Intralinks global M&A Dealmakers survey for 2022. I'm joined by Nick Cheek, editor of Acuris Studios, and by Matt Wells, vice president of product marketing for SS&C Intralinks.

Hi, Nick. So can you run through how the survey was carried out and what the main contents are, please?

NICK CHEEK: Between Q2 and Q3 this year, we did a survey of 300 dealmakers, 225 of which were corporates and 75% of whom were private equity. And they came from all different continents. This was a global survey. So we had 100 from North America, 75 from EMEA and APAC, and 50 from Latin America. And they were from all sectors as well, so particularly from the TMT sector, farmer, consumer, industrial, and chemicals, but actually from all of them, and from all sizes of companies. So we weren't just looking at the largest companies, we're looking at largest and small-to-medium enterprises as well.

And this survey was looking at global M&A sentiment, broad global M&A sentiment, but also deal expectations, COVID repercussions, and also digging into ESG readiness, how the process of M&A has changed. And also aspects such as how technology has changed the M&A process and M&A in general, and what dealmakers are actually looking for. And we got-- I mean, there are a lot of findings because it's a large survey and we came out with a number of different things. But dealmakers are very optimistic and that's for the year ahead and for the 18 months ahead. And they are looking to do more deals in the future, and they are seeing that certainly in sectors such as pharma, TMT, the way that lifestyles have changed is going to promote more dealmaking.

Another interesting finding was that private equity is likely to lead the way in dealmaking, as opposed to their corporate counterparts. And other aspects was the growth of ESG, and that's not just ESG in terms of looking at companies who promote sustainability or diversity. It's also the way that the process is going to change, how companies are going to be having to do more ESG, do due diligence. And finally, I don't think this is a huge surprise but it's just how technology is going to change the process and also changes the targets that companies are looking at. So digital disruption, data analytics, cybersecurity are all huge topics for the 18 months ahead for Dealmakers.

JULIE-ANNA NEEDHAM: Thanks, Nick. So Matt, coming to you. Can we look at the main drivers for M&A in the coming year? The survey found that digital transformation, synergy creation, and pursuing diversification of products are seen as the main drivers for the next 12 months. Can you give us your thoughts on that, please?

MATT WELLS: Absolutely. If you really think about it, those drivers make complete sense. I would say pre-pandemic, I think we all recognize technology's increasing role in our lives and in the way that companies operate. But I think we became almost dependent on it over the past two years since the pandemic started. This opened the eyes of many executives and boards to identify tech shortcomings and go and address them. Many times through acquisition, capturing synergy is always going to be a big M&A driver, pandemic, no pandemic, booming markets, busting markets. But if you ever think you have an opportunity to make 1 plus 1 equals 3, you always go for it. So with ever-increasing valuations, this is still much easier said than done.

JULIE-ANNA NEEDHAM: And Nick mentions about ESG. The survey shows that ESG has rocketed up the agenda for executives. How is it changing the landscape for dealmaking?

MATT WELLS: Yeah, ESG, seems like that topic is everywhere, those three little letters seem to be omnipresent especially when you talk about M&A and deals. And it's making a big impact pretty quickly, whether it's driven by the companies themselves, their shareholders, LPs or other investors, ESG definitely seems to be a focal point. ESG is no longer this niche topic reserved for impact funds. It's becoming part of every single deal.

Obviously, the impact will be felt differently across sectors and industries, but all buyers and sellers are now thinking about how they stack up from an ESG perspective, I would say. And they need to be prepared to vet these issues in diligence. It needs to be something that you're thinking about way before the deal starts, whether you're coming from the buy side or the sell side, and have a plan to communicate what you're doing about ESG or communicating how this investment, if it's an acquisition, can help and help further your ESG agenda.

JULIE-ANNA NEEDHAM: Thank you. And data analytics and cybersecurity is seen as the main disruptive trends in the M&A process. How can dealmakers keep up with these ever-changing tech trends?

MATT WELLS: Yeah, this was an interesting one. In an area where the responses to the survey were clearly shaped by the acceleration of technology, adoption across the deal process, data and analytics provide unique insight that may not have been previously considered on an individual deal or across deals, even more importantly sometimes. Better data analytics ultimately drive better decision-making, which is crucial in making deals successful. Cybersecurity isn't just a risk for tech companies. It's a risk for all companies, and something that's becoming a focal point during the deal process.

Things like ransomware attacks are becoming more common, and GDPR and other data privacy regulations further compound the issue and carry potential meaningful penalties. There's an entirely new body of diligence ensuring that these risks are appropriately mitigated when looking to engage in M&A.

JULIE-ANNA NEEDHAM: And Nick mentioned it earlier, but let's have a look at private equity. How and why is private equity still being seen as the dominant force in M&A.

MATT WELLS: When it comes to private equity, I think we've all talked and heard ad nauseam about the amount of dry powder and cash in private equity coffers. And I think we're seeing the results of some of that now. A lot of that coming to fruition. This has been already through Q3 and incredible year for private equity deal volumes. And I know the survey respondents see that going away any time soon or declining next year in 2022.

The other thing is they're also ripe with exit options that didn't exist or didn't exist to this magnitude before. So you think about the IPO market being so strong, SPACs becoming a legitimate exit option as well, and the appealing alternative for corporates. There's still a lot of money on corporate balance sheets and larger private equities have very strong appetites to acquire private equity firms that are coming-- private equity firms that own assets that may be a little bit smaller as well. So I think the mixture of those ingredients will continue to propel PE as a major force next year in 2002. 

JULIE-ANNA NEEDHAM: So looking at some of the other survey findings, more complex due diligence and a difficult economic environment is seen as key challenges for M&A post-COVID. Do you agree with those findings? And what other challenges are you seeing for dealmakers?

MATT WELLS: I do agree with those findings. I think these record-breaking valuations, there's just immense pressure to not only close the deal quickly but to also ensure you're able to get your arms around that asset, that company as best as possible. Those two forces don't exactly go hand in hand. In fact, they really work against each other. And I do think that this is an area where advancements in M&A technology have given dealmakers the power to process greater amounts of information, more complex information with a lot higher confidence a lot more quickly.

So advances in things like artificial intelligence, machine learning, that's allowed dealmakers to kind of cut to the chase and extract key findings more quickly, helping them to get to the finish line in time frames that simply would not have been possible before. So the role of technology in the process will absolutely continue to impact time frames around M&A, how quickly deals can get done, especially in due diligence but not just limited to due diligence.

JULIE-ANNA NEEDHAM: Great. Thank you. And to finish, Matt, rounding all of that up, why are dealmakers so optimistic about the year ahead?

MATT WELLS: I think really first and foremost, it's the strong fundamentals that have been in place over the past year and will continue to remain in place for the foreseeable future, at least in the short term. Things like low cost of capital, large amounts of corporate cash and private equity dry powder, coupled with the drive for some of the things we discussed before around digital transformation diversification, those will all continue to be catalysts for this booming M&A market. And while we're certainly not out of this pandemic by any means it seems now, I think dealmakers have been able to look beyond it and focus on opportunities for inorganic growth. So barring any major outliers, I don't see this momentum slowing down anytime soon.

JULIE-ANNA NEEDHAM: Great. Thanks very much. That was Matt Wells, vice president of product marketing for SS&C Intralinks, and Nick Cheek, editor of Acuris Studios. Thank you for listening to this week's episode of Dealcast, presented by Mergermarket and SS&C Intralinks. Please write review, and follow or subscribe to the podcast. You can find us on Apple podcasts, Spotify, or look out for your Mergermarket news alerts. You can find more information, including a link to the survey in our show notes. Join us again next week.