Most M&A professionals predicted strong growth in corporate deal activity globally during 2022. The turbulent geopolitics of the first two months of the year will put that optimism to the test.
- The first two months of 2022 have seen the largest opening year for global M&A in modern times, exceeded only by the final hurrah of the dot-com bubble in 2000.
- More than $740bn in M&A transactions were announced in January and February.
- The conflict in Ukraine has however dampened activity in the M&A sphere.
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Human society is never without conflict somewhere in the world, and with the situation in Ukraine, 2022 is sadly no exception.
In the face of such a humanitarian crisis and geopolitical upheaval, many big decisions will be deferred, and that will affect corporate deal-making.
Typically, when we ask about the factors that may impact deal-making, extraneous interruptions – whether conflict, geopolitics or trade wars – usually feature prominently.
However, at the end of 2021, after nearly two years of almost perpetual pandemic crisis mode, deal makers were in an optimistic mood – and focusing on economic fundamentals, business and investor needs and local factors. Mentions of external factors, such as overseas influences and politics, hit historic lows.
With the disruption of COVID-19, there was a perceived need for companies to adapt to a very new trading context, and M&A can be a bold and effective way of repositioning even large businesses.
A promising start to the year for M&A
If anything, the start of 2022 was even more frenetic than expected.
The first two months have seen the largest opening year for global M&A in modern times, exceeded only by the final hurrah of the dot-com bubble in 2000.
More than $740bn in M&A transactions were announced in January and February. But with the outbreak of hostilities in Ukraine, volumes fell by one-third by the time February was through.
However, the year is yet young, and while major crises can delay when deals are announced – and may permanently halt certain deals – it is change itself that makes M&A a valuable tool in any C-suite’s kit.
Securing supply chains and access to materials, adapting to changing habits, wants and needs – these are the pressures that thoughtful M&A can address.
So when deal makers put fundamentals ahead of outside factors when thinking about 2022, they may yet prove to be correct.
The task of corporate leaders is to identify potential and realise profit, by expanding into new markets, diversifying offerings and so growing revenues. It was these fundamentals – not the broader political environment – that M&A professionals focused on as the drivers of activity in 2022.
It’s a bold and optimistic vision, with real social utility. I would not bet against it yet.