Will 2022 surpass 2021?
Deal activity is expected to reach another record level in 2022. This projection follows completion of the anticipated record 2021 in both deal volume and deal values.
Expectations in 2022 include:
- Lower middle market, middle market and mega deals will all grow in deal volume, setting respective record year by size;
- M&A values will remain at their current levels consistent with 2021 valuations; however, there will be limited potential for further value expansion beyond 2022;
- Private Equity buyers will continue their aggressive platform and add-on deal purchases as they deploy the investible cash in their respective funds;
- A record number of companies will be active strategic buyers;
- Industry sectors of niche manufacturing, specialized distribution, technology, and business services continue to attract buyer attention;
- COVID-19 and its successive variants have actually stimulated sellers’ monetization of their companies, with buyers considering it a due diligence issue versus a financial performance risk;
- COVID-19 has dramatically accelerated the expansion of E-Commerce and the Virtual Work Environment;
- Other M&A deal stimulants are U.S. Government stimulus programs, excess investible cash, and a shortage of “good companies” to acquire;
- Due Diligence has adjusted to include the respective targets’ staffing/recruiting adequacy, E-Commerce technology, Supply Chain management, and Digital Marketing; and
- Political hurdles appear to be in place to rationalize President Biden’s tax, environmental, infrastructure and social agenda without damaging the M&A trends currently in place.
Considering the universe of factors that influence the M&A environment, 2022 should be another good year for both “high quality” sellers and active buyers.