M&A Market State 2022 and Prognozes

The trend for M&A in 2022 has been positive so far. 2022 is expected to follow the growth trend of 2021 and surpass it moving from hundreds of millions of dollars in deals to growing interest from space companies.

The volume of the global M&A market in 2022

The modern development of the economy in the context of globalization, technological progress, and market liberalization directly impacts the competitive environment. It thereby increases the relevance of the processes of mergers and acquisitions (M&A), which, however, are accompanied by numerous risks.

2020-2021 has become one of the most challenging years in the recent history of the whole world. The COVID-19 pandemic has forced the management of companies to think about the strength and sustainability of their business, about its compliance with the realities of the modern world. However, even in such a difficult year for the entire global economy, the M&A market managed to stay at the average level of recent years.

According to Bloomberg data, the volume of M&A transactions concluded this year on the eve of the announcement of the merger between WarnerMedia and Discovery was about $1.8 trillion. This figure is a record value for the entire history of this time and is more than two times higher than the same indicator in 2020. M&A activity is on the rise in all major sectors of the economy, thanks to the gradual recovery from the coronavirus crisis.

Among the main growth factors are:

  • the post-COVID theme;
  • low-interest rates;
  • the availability of capital.

There is also a lot of private capital on the market – large corporations have accumulated cash from operating activities and chosen strategies for growth and diversification of jurisdictions. Although venture and private funds remain serious players, corporations are beginning to occupy an increasing niche. Another trend is that low-tech companies buy high-tech ones; therefore, we see an even more profound shift into digital.

Prognozes in M&A market

  • The dynamics of capital concentration reached a record level

The M&A market today is different from what it was 20 years ago. Executives must keep up with an increasingly diverse map of alternative deal models, such as partnerships and corporate venture capital. This complex and evolving market requires a wide range of skills and a deep understanding of the terms of the deal on the part of buyers.

In 2022, lawyers and M&A advisors expect many of the factors that pushed companies to enter into M&A deals 2021 to continue. However, changes are predicted in the near future that could slow down the pace of corporate mergers. Among them is the increase in interest rates by the US Federal Reserve. It can increase the financial costs of companies and increase control by antitrust regulators.

  • Valuation of companies above the available assets will lead to stagnation

M&A volumes reached a new peak in 2021, supported by low-interest rates and strong stock prices. However, in 2022 the situation will change: large mergers and acquisitions will occur less and less as the estimated value of companies continues to grow. And only companies with a strong market position and large cash reserves will have opportunities for new acquisitions. The high threshold for such transactions will complicate small and medium-sized companies’ growth and development opportunities and create advantages for larger players with a strong market position.

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