2022 M&A Market Forecast: Continued Growth Expected

The mergers and acquisitions market has been booming in 2021, far surpassing last year’s totals. The team at Hinckley Allen shares their insights into the 2022 deal market and beyond.

What is happening in the current M&A market?

The M&A environment is incredibly robust, even though other parts of the economy are slowly recovering from Covid. Deal flow has gotten stronger every quarter, with peak closings expected in December. Based on our pipeline, we see 2022 continuing the upward trend.

What factors are contributing to current activity levels?

Initially, there was a lot of optimism about the vaccine and the return to pre-Covid business levels. Confidence remained high due to continued low interest rates, incredible liquidity and availability of capital in the marketplace, including from both equity and credit sources.

Private equity (PE) firms remain eager to deploy capital to emerging and established middle-market companies, particularly in industries that remain red hot, whether in tech, healthcare or ESG-oriented companies. We are also seeing larger PE firms consider minority investments when they have traditionally considered only buyout transactions. Some sources are estimating that PE deals comprise almost 40% of all M&A deal activity.

Strategic buyers with strong profits have also built up cash stockpiles, and have been aggressively pursuing both vertical and horizontal acquisition opportunities. Those low interest rates have made debt financing attractive and available to strong corporate borrowers. This will enable them to comply with restrictive lending standards, with senior debt available to not only fund acquisitions, but also to take out more expensive debt instruments.

Finally, in certain parts of the market, the surge in SPAC activity has provided some established private companies access to the public markets and the liquidity it provides to founders and owners. Although regulatory oversight and challenges have cooled SPAC enthusiasm, we expect SPACs to continue to be chasing deals into the coming year.

What factors could hinder or slow the growth in M&A activity in the coming months or year?

The impact of the Covid and its many variants remains a real concern. For companies that struggled during Covid, the fear of pandemic disruption is worrisome. For middle-market corporate sellers and their owners, potential increases in both the corporate and capital gains tax rates — whether at the state or federal levels — remain. Rising inflation is a macro-economic concern for all business owners and operators.

For bigger companies and large transactions, a more aggressive U.S. antitrust environment could impede certain types of deals from happening.

What trends are you seeing in your M&A deals in this robust market?

Investment bankers understand that it’s a sellers’ market. Auctions are incredibly competitive, and sellers have lots of leverage. PE buyers and strategic suitors need to be super aggressive to win bids and most post-closing risks are being pushed onto the buyers.

How has Hinckley Allen managed through all of this increasing M&A deal work?

Our team has been very fortunate in that our clients frequently call upon our corporate practice to help them through their most important merger and acquisition transactions.

While we have been incredibly busy, our team approach to these transactions has made all the difference. We have talented, deal-savvy corporate attorneys who understand what it takes to smoothly guide a deal from term sheet to conclusion.

Our first and primary focus is our client, including understanding our client’s goals for a particular transaction, and developing a strategy which meets those goals.

We believe in staffing these transactions carefully, with the right core team, and drawing upon specialists in tax, intellectual property, securities, real estate, labor, health care and other specialties where necessary, so that we deliver both value and good results efficiently. Our deep understanding of the market is a big help to our clients.


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