Mergers expected to soar in 2022


IT is suspected that global deal-making is set to soar this year – especially since last year saw record high deals tallying up to N$79,5 trillion in the global mergers and acquisition space.

According to a Reuters report, the sporadic mergers were fuelled largely by easy availability of cheap financing and booming stock markets.

The report shows that Global M&A volumes topped US$5 trillion for the first time ever, comfortably eclipsing the previous record of US$4,55 trillion set in 2007, Dealogic data showed. 

Flush with cash and encouraged by soaring stock-market valuations, large buyout funds, corporates and financiers struck 62 193 deals in 2021, up 24% from the year-earlier period, as all-time records tumbled during each month of the year.

Investment bankers said they are expecting the deal-making frenzy to continue well this year, despite looming interest rate hikes.

Higher interest rates increase borrowing costs, which may slow down M&A activity. However, deal advisers still expect a flurry of large mergers in 2022.

Accommodative monetary policies from the US Federal Reserve fuelled a stock market rally and gave company executives access to cheap financing, which in turn emboldened them to go after large targets.

The US led the way for M&A, accounting for nearly half of global volumes – the value of M&A nearly doubled to US$2,5 trillion in 2021, despite a tougher antitrust environment under the Biden administration.

The largest deals of the year included AT&T US$43 billion deal to merge its media businesses with Discovery, the US$34 billion leveraged buyout of Medline Industries; Canadian Pacific Railway's US$31 billion takeover of Kansas City Southern; and the breakups of American corporate behemoths General Electric and Johnson & Johnson.

According to a survey of deal-makers and advisers by Grant Thornton, over two-thirds of participants believe deal volumes will grow despite challenges posed by regulations and the pandemic.

Deals in sectors such as technology, financials, industrials, and energy and power accounted for the bulk of M&A volumes. 

Buyouts backed by private-equity firms more than doubled this year, to cross the US$1 trillion mark for the first time ever, according to Refinitiv data.