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After a Record Year in 2021, What Will 2022 Hold for M&A?

By Generational Equity

2022 M&A

That is the question that is on every dealmaker’s mind now. Our friends with Middlemarket.com produced an article that delved into this very question. Here are some of their thoughts:

The biggest mergers and acquisition boom in history isn’t showing signs of slowing. Companies announced a mammoth $5 trillion-plus of deals in 2021, according to data compiled by Bloomberg, eclipsing the previous annual record set in 2007 by almost $1 trillion thanks to wave after wave of transformational M&A right up until the holidays.

Nearly two years into a global pandemic, dealmakers expect the pace to remain strong next year. “Despite the fact that we’ve set a record for the M&A market I believe we’re capable of reaching greater heights if the CEO and board room confidence remain strong,” said Cary Kochman, global co-head of M&A at Citigroup Inc.

And here are some additional thoughts from a few of our esteemed investment banking colleagues regarding 2022:

Martha McGarry, co-head of Mayer Brown’s M&A practice in the U.S.

“Corporate operating performance has stayed very strong and I don’t see that changing at least for the first two quarters of next year. I know just talking to management teams that they have significant M&A agendas both on the buy-side and sell-side going into next year. There’s a lot they want to accomplish. That makes me very bullish.”

Jim Langston, co-leader of the U.S. M&A group at Cleary Gottlieb Steen & Hamilton LLP

“Some companies are going to come off the sidelines. In this environment scale is everything, so if other companies in the same sector are growing through M&A and transforming or optimizing their businesses and you’re not a participant, then you risk getting left behind.

Tom Miles, co-head of Americas M&A at Morgan Stanley

“You had a valuation environment where boards and management teams and shareholders are willing to sell. They’ve been through Covid. They’re saying: if someone can pay me a premium at this time, I’m willing to entertain that.”

Marco Caggiano, co-head of North America M&A at JPMorgan Chase & Co.

“This is certainly the most active environment that we’ve seen and we don’t see any signs of it abating materially. We expect corporate clarity to continue to be a big driver. You can observe a P/E multiple premium in the S&P 500 over time for ‘pure play’ companies with only one reporting segment versus companies with more than one reporting segment. Strategics are trying to make it easier for investors to assign premium valuations to them and hoping that will translate into higher stock prices.”

Adam Emmerich, a corporate partner at Wachtell, Lipton, Rosen & Katz

“Everybody who’s been doing M&A for a while has been involved in cycles of boom and bust. People wonder, if everybody knows that things are going to come crashing down, then why aren’t they behaving more ‘sensibly’? The truth is that there will be a turn in M&A at some point, we just can’t say when. It certainly doesn’t feel like it’s going to be in the first quarter of 2022. And ultimately almost all reversals are cyclical.”

Brenen Hofstadter, Chief M&A Officer with Generational Group

"While M&A has been cyclical, we are now experiencing something that has been anticipated my entire 30-year career - the beginning of the M&A SuperCycle fueled by the retirement of the baby-boomer generation. This will result in $10 Trillion+ of aggregate deal values and liquid wealth transfer."

So based on this small sample size, two things are apparent to me:

  1. 2022 may indeed be another record year for dealmakers
  2. Every business owner needs to have a strategic exit plan in place to take advantage of the frothy M&A environment

The good news is that Generational and its family of companies, can successfully help you navigate this second goal. Our team consists of experts that can walk the journey with you to your eventual exit:

We are proud of our success and our ability to provide services from outset of your business all the way to helping you sustain financial freedom for you and your family.

If you would like to learn more about us, please use the links above or call us at 972-232-1121.

Carl Doerksen is the Director of Corporate Development at Generational Equity.

© 2022 Generational Equity, LLC All Rights Reserved

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