Mid-market M&A buoyancy set to continue through 2022 with 80% of dealmakers eyeing opportunities


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Top 40 law firm Trowers & Hamlins reports continued optimism among the M&A community for the year ahead, with 80% of dealmakers eyeing opportunities in their key markets and 70% expecting valuations to keep increasing. The projections come off the back of a new report analysing key trends in UK mid-market M&A and beyond. 

Key findings summary: 

  • 80% of respondents see opportunities in their key markets
  • 70% of respondents expect valuations to increase
  • Just 2% of respondents are not currently considering dealmaking activity
  • 59% point to Financial Services, Healthcare and Technology as most active sectors
  • Private equity remains a strong driver of dealflow
  • Views split on Covid’s biggest impact: 30% say time taken to complete; 30% say transactional approach
  • Transformative potential of DealTech yet to be felt

After a temporary initial pause on activity when Covid-19 uncertainty was at its peak, 2021 was a record year for M&A, with market sentiment showing that dealmakers have every reason to be equally optimistic for 2022, too. Strong business confidence and the availability of capital to be deployed are high among the factors causing such a bullish outlook, with private equity set to remain an active driver.

The outlook is so bright, in fact, that just 2% of respondents to Trowers’ recent M&A survey noted that they are not considering dealmaking activity. In contrast, a vast majority (80%) see ‘some’ or ‘many’ opportunities in their key markets. Respondents were those working in C-suite decision-making roles at corporates, private equity professionals and corporate finance advisors.

The current seller’s market is here to stay, evidenced by respondents’ views on company valuations and expectations around deal values. Only 1% see valuations and deal values falling this year, while 51% think they will be higher, and a further 19% expect them to be much higher.

Further easing of pandemic-related restrictions will boost business confidence across most sectors, while dealmakers are keen to retain those elements of enforced change which have worked well, such as remote conducting of due diligence and virtual meetings with management teams. Trowers’ survey respondents reported the impact of Covid-19 as inconvenient but certainly not insurmountable, with 30% saying it had impacted the time taken for deals to complete, and another 30% reporting that its main impact had been on transactional mechanics and dealmaking processes. 

While technology proved a useful tool in facilitating new dealmaking processes, it has not disrupted the M&A market as significantly as other areas of business. Despite social restrictions, survey feedback showed that dealmaking remains a field dominated by strong inter-personal connections, with use of technology limited to administrative functions including document automation and deal workflow tools. If 2022 is the year that DealTech takes off, it will need to complement the value that human relationships bring, rather than seek to replace them.

A combined 59% of respondents identified Financial Services, Healthcare or TMT as likely to be the most active sector for dealmaking. The biggest barrier to getting deals done was identified as economic uncertainty (listed by 69% of respondents), but these sectors have shown resilience and the appetite for transacting does not seem to be dampening. 

Tim Nye, partner and Head of Corporate at Trowers & Hamlins, comments: 

“All signs point to a continuation of 2021’s record levels of M&A activity. The market is as buoyant as it has ever been. There is no shortage of capital to be deployed and appetite remains strong, so we anticipate another busy year. The combination of liquidity and confidence means people are keen to explore options and put their money to work. 

The service economy will therefore need to keep pace with activity levels so that bottlenecks do not arise. Deals die when momentum is lost, so this will be crucial. 

There are plenty of opportunities out there, but dealmakers will need to focus on specific goals and criteria to cut through the ‘buzz’ of frenzied activity levels to ensure they are executing transactions that align with broader business strategy.”

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