By Rusty Wiley, CEO of Datasite

Deal activity in 2022 is expected to continue to be strong, buoyed by favorable interest rates and plenty of dry powder in the way of private equity cash piles. In fact, 75% of global dealmakers expect volumes to increase or remain the same in the next 12 months as compared to 2021. We’re also seeing this in real-time on our platform, where new global projects are up year-over-year by over 30% year-to-date, and because these are deals at their inception rather than announced, it’s a good indicator of the strong mergers and acquisitions (M&A) environment to come.

Hunting for Growth

However, if 2021 was all about transformational deals fueled by organizations turning to technology and combining with other companies to ensure their competitiveness, dealmaking in 2022 will be focused on growth, whether it be organic or the result of revenue synergies.

Transformational deals will no doubt continue in 2022, especially as companies seek to future-proof their businesses. Yet many dealmakers are expecting to acquire new businesses, especially products, services, or markets, to expand a company’s revenue and profit. Most global dealmakers identified organic growth potential and revenue synergies as the most important considerations for target evaluations next year, ahead of cost synergies. This may apply, especially, to deals in the consumer and industrial, transportation and defense sectors, where rising activity is already taking place. For example, year-over-year new global industrial, transportation and defense projects on Datasite’s platform are up 56%, year-to date versus the same period a year ago. In terms of sector activity, healthcare and technology and entertainment and telecommunications (TMT) are expected to continue to increase in 2022, spurred by powerful innovation trends brought on, in part, by the global pandemic which has, for example, put a spotlight on the ongoing need for more healthcare technology, including telemedicine.

M&A Obstacles

Still, there will be some obstacles to completing deals in 2022. Most global dealmakers said inflation affected a deal they had worked in 2021, because it changed company operating assumptions, affected deal valuations or ultimately caused a deal to fall apart. In 2022, dealmakers are again expecting inflation to be one of the top reasons for deals going off track, in addition to environmental, social and governance (ESG) risks, labor shortages and supply chain issues. As investors and consumers exert more pressure, environmental issues are cutting to the core of M&A, and dealmakers have realized that all due diligence needs to have an ESG component. We are already seeing this in the unprecedented levels of vetting and due diligence taking place on Datasite’s platform, where the amount of content stored in new global projects is up year-over-year 35% year-to-date, compared to the same period in 2020.

Given this, technology and tools to manage the M&A process will continue to be vital to dealmakers so that they can increase their capacity to manage the anticipated high volumes of transactions expected, as well as conduct complex due diligence activities to reach successful outcomes. Increased use of technology may also help dealmakers better manage their work life balance, including spending more time with family, which is a top personal priority for dealmakers in 2022.

As 2021 draws to a close, there is still lots of uncertainty for the year ahead from an economic, social and political standpoint, in addition to the quickly evolving omicron variant. But all indicators seem to point to another strong year in M&A, with lots of opportunities for dealmakers on the horizon.

*The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of LexUniversal.