M&A reached record heights in 2021 globally and deal momentum is set to continue in 2022

Deniza Cristian 26/01/2022 | 12:22

The M&A market set new records in 2021 in both volume and value terms. The number of announced deals exceeded 62,000 globally in 2021, up an unprecedented 24% from 2020, and the deal values reached an all-time high of USD 5.1 trillion, according to PwC’s Global M&A Industry Trends: 2022 Outlook. A strong deals pipeline, the availability of abundant capital and ongoing intense demand for digital and data-driven assets point to another supercharged year for M&A in 2022.

 

“The Romanian M&A market also had a very good 2021, during which it exceeded both in volume and value the figures reported in the previous year. For this year, we expect the trend of increasing transaction volume and value to continue, with more and more Romanian entrepreneurs wanting to expand their businesses and gaining the courage to look at investment opportunities in other markets. At the same time, many of the investment funds active in the Romanian market have raised new financing and reconfirmed their confidence in the growth potential of their investments compared to other emerging markets in the CEE region”, said Cornelia Bumbăcea, Partner Deals, PwC Romania.

Investment funds have raised record money and are stepping up activity

Private equity (PE) ended 2021 with a record USD 2.3 trillion in “dry powder”. That was 14% higher than at the start of the year on the back of record fundraising, and there is plenty more capital to come for M&A in 2022. Almost 40% of deals in 2021 involved a PE fund, up from just over a quarter for the past five years. While funding is abundant, there will be increasing pressures on PE to find ways to create value in an environment of rising interest rates, higher multiples, and ESG pressures.

Portfolio reviews are driving divestiture and acquisition activity across industries

On the corporate side, we expect the strategic shift to digital, innovative, and new disruptive business models to continue to drive M&A decision-making. Portfolio reviews are triggering a wave of divestitures across industries as corporate dealmakers seek to reinvest and optimize their assets for growth. Environmental, social, and governance (ESG) factors will also increasingly influence M&A strategies throughout 2022.

“We expect M&A activity in Romania to grow even more strongly in the energy, transport, and logistics sectors in 2022. However, the sectors that have generated transactions in the last two years will certainly remain at the top: real estate, telecom and technology, healthcare and financial services, as well as specialized manufacturing. While optimism remains high for a strong 2022, headwinds from higher interest rates, rising inflation, increased taxes, and greater regulation could pose structural or financial hurdles for completing deals in 2022”, said George Ureche, Director and M&A Leader, PwC Romania.

These trends are playing out across key industries:

  • Consumer markets: Consumer preferences will continue to serve as a catalyst for M&A activity in 2022 as corporates and PE remake their portfolios to capitalize on trends such as ‘conscious consumerism’ which is creating demand for new products, services, and business models.
  • Energy, utilities, and resources (EU&R): ESG is driving strategies across the industry. M&A will be used to rebalance portfolios and pursue value-creation opportunities in ESG growth areas such as renewables, carbon capture, battery storage, hydrogen, transmission infrastructure, and other clean technologies.
  • Financial services: Competition for strategic market advantage continues to fuel M&A, with activity led by deals for technology and innovation. Distressed assets in the banking and insurance sectors could produce a wave of deals.
  • Health industries: Pharma companies are seeking to optimize their portfolios for growth through deals that provide access to new technologies such as mRNA, cell, and gene therapies. In healthcare services, specialty care platforms, telehealth, health tech, and data and analytics companies are attracting investor interest.
  • Industrial manufacturing and automotive: Strategic portfolio reviews and ESG are driving M&A activity, especially deals that accelerate digital transformation such as electric and autonomous vehicles, batteries and charging technologies, additive manufacturing, next-generation materials, and production with non-fossil energy sources.

Technology, media, and telecommunications: The technology sector will continue to see unmatched levels of deals activity and values as companies from across all industries seek to acquire key technology or digital capabilities.

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