3 M&A trends to watch in 2022 as dealmaking pace continues

Mergers and acquisitions (M&A) have picked up the pace over the past year faster than Usain Bolt’s 100-meter runs. Executives have been inking deals at a breakneck pace since September 2020. Private equity, for example, was clocking in at almost US$945 billion dollars in U.S. buyouts toward the end of 2021. That is 2.5x the volume for the same period in 2020 and more than double the previous 2007 peak.

There’s still no end in sight. S&P Global put M&A on their list of 2021 trends shaping sectors. While we know this pace will slow eventually, it looks like deal volume will continue at these levels for now, barring major disruptive forces. Bearing that in mind, here are a few key trends within M&A that may color the upcoming months.

1. Virtual M&A is here to stay

If you would have mentioned doing “virtual” due diligence to an M&A executive just a couple of years ago, you would have likely gotten a blank stare. Yet, here we are, doing virtual deals—including due diligence—at the end of 2021. Today’s environment requires a creative approach when it comes to meeting the management team or walking a facility.

We’re finding that these approaches are both practical and effective. Meeting the management team has gotten a lot easier because during the pandemic, they weren’t traveling. Everyone was working from home. So while it was a virtual meet-and-greet, it was far easier to schedule without having to juggle the usual international travel schedules. Touring everything from plants to warehouses was made possible thanks to drones and robots that acted as virtual eyes and ears for human dealmakers.

We have seen the cost efficiencies and speed of virtual M&A—and for those reasons, among others, I don’t think things will go back to the way they were. We will likely have more of a hybrid approach in the future, with a mix of in-person and virtual. Now that companies are seeing the value technology can bring to a deal, it is here to stay.

2. The global regulatory environment is shifting yet again

Global regulation is something every M&A executive monitors. You don’t need a crystal ball to see that deal scrutiny is growing, exacerbated by a pandemic-induced emphasis on geographic borders. Increasing tensions between regions are cited by C-suite executives as the biggest uncertainty impacting corporate strategy and investment decisions right now—even ahead of the pandemic, according to a recent survey we conducted with more than 3,000 CXOs globally. In this setting, intellectual property issues loom large.

In the United States as well as in Europe, we see heightened sensitivity toward Big Tech, with some regulators taking more aggressive positions, stopping certain deals. Since Brexit took effect, the U.K.'s Competition and Markets Authority―the competition-regulating agency there―now has more independent authority when it comes to deal oversight as well.

Will this become an impediment to larger mergers and acquisitions? Megadeals continue today, but certain sectors may be harder hit in this area than others. For instance, battery technology is going to be the next hotbed, particularly with the electrification of cars and the U.S. building infrastructure to support electric vehicles (EVs) on a massive scale. This will be a technology space that regulators will want to protect. Does that create downward pressure on certain sectors? Only time will tell, but it is certainly something for which executives looking to do large deals will need to plan.

3. ESG is still nascent, but it matters more and more

For reasons including portfolio rebalancing and differentiation, private equity firms are increasingly committing to improve their environmental, social and governance (ESG) positions. For many individual companies, ESG is not a big deal driver yet. As sustainability is a key part of corporate strategy, however, it is important to look at how the deal fits and to assess it from an ESG perspective. In any deal, executives should prepare to conduct ESG due diligence. Right now, you can go to three different ESG information sources and get three different profiles on a company. I anticipate this area will become easier to address. A need for standardization and integration will come to the fore in the near future. 

As we look ahead to 2022 and continue at full throttle in the mergers and acquisitions space, I also see growth continuing to dominate. It’s all about making strategic deals and growth plays. Scalability and reliability matter, but in the end, it comes down to growth. I think we will see an increasing number of companies building muscle in this area throughout 2022.

Tell me what you think about these trends, and I am happy to discuss how Accenture can support your deals in the coming year. As we continue dealmaking at a rapid clip, I hope you found the breathing space to celebrate the holidays with your loved ones—the pandemic has certainly brought the importance of that home.