2022 M&A Is Mind-Boggling. What’s Fueling All the Activity?

2022 M&A is off to a mind-boggling start. Not even two full weeks into the new year, Channel Futures is reporting on yet more transactions every day — and that’s just within the indirect channel. Whether vendor or partner, companies are eager to combine strengths, augment weaker areas and beef up presence in new regions.

As for the amount of money companies are throwing at each other, that’s a bit of a question mark. Most of the deals are private, so the amounts are not disclosed. Behemoth advisory firm PwC says there’s a “significant increase” in volume among “not-quite-mega” deals, a category that likely houses much of the channel’s M&A. 2021 saw more than 800 transactions totaling between $500 million and $5 billion in value, PwC says in its Deals 2022 Outlook. That number compares against a typical year featuring 400-500 such deals, the firm notes. The stats indicate that 2022 M&A could rise even higher. Given the transactions already wrapped thus far, activity that outpaces 2021 looks more than possible.

“[M]any companies are navigating the competition for assets in different ways, including through smaller and midsize transactions that could still deliver solid proceeds and ultimately be scaled for larger deals,” PwC says.

Of course, there are no guarantees. Certain headwinds could start blowing harder and snuff out the flames of any nascent M&A arrangements. One of the most prominent potential headwinds? Inflation. In fact, 71% of respondents told M&A industry SaaS provider Datasite that inflation impacted an M&A deal they worked on in 2021. They expect that obstacle to carry over in 2022 (no surprise, given the 7% rate at which inflation already has risen). Law firm Hinckley Allen concurs with this observation.

“Rising inflation is a macro-economic concern for all business owners and operators,” legal experts write in the company’s 2022 M&A Market Forecast.

Still, 48% of the dealmakers polled by Datasite said they expect M&A to increase this year.

Another headwind that could put a stop to any 2022 M&A comes in the form of ongoing supply chain problems. Indeed, 14% of Datasite’s respondents cited this as a key obstacle. GDP growth, unemployment, tax rates and a more aggressive antitrust environment in the United States also could impede progress.

Underlying all of this is, no shocker, COVID-19.

“The impact of [COVID-19] and its many variants remain a real concern,” Hinckley Allen’s experts say. “For companies that struggled during [COVID-19], the fear of pandemic disruption is worrisome.”

Yet in spite of these potential deterrents, observers remain upbeat about 2022 M&A. Last year’s boom “looks set to continue,” said Duncan Smithson, M&A expert at advisory firm Willis Towers Watson. “M&A activity in 2022 looks poised to match the peaks of 2015,” Smithson added.

With all of that as context, Channel Futures wanted to explore the trends that are making 2022 M&A so attractive. We did so in the slideshow above. Keep these patterns and issues in mind as more companies announce more deals. Because they will.