The recently released M&A Risk in Review report by Aon and Mergermarket, has found optimism in the market as it suggests that last year’s resurgence of M&A activity can be somewhat sustained, yet headwinds persist in the wake of the Covid-19 pandemic.
Even though record levels will not be as seen in 2021, re/insurance broker Aon suggests, dealmakers will be looking forward to future transactions as they seek opportunities amid recovering global growth and pursue digital transformation.
The outlook is particularly strong for M&A in sectors such as technology, media and telecom (TMT) and in the Asia Pacific region.
Mergermarket surveyed 50 senior executives from corporate development teams, private equity firms and investment banks in the late Q4 2021 and early Q1 2022.
Additional findings from the report include 70% of respondents citing TMT as the most prolific sector in terms of expected dealmaking over the next 12 months. At the other end of the spectrum, 54% of them believe M&A will be least prolific in the energy, mining and utilities (EMU) space.
Most responders (54%) identify Asia Pacific (excluding Japan) as the single most attractive region for M&A over the next 12 months. Just over a third (34%) single out North America, with a further 32% also identifying the region as the second most attractive for M&A overall.
The vast majority of respondents (90%) predict an increase in scrutiny of deals for ESG implications over the next three years; almost half (48%) believe the increase will be significant.
Alistair Lester, global co-CEO of M&A and Transaction Solutions at Aon, commented: “Even after the recent intense period of record M&A activity, dealmakers still maintain a healthy pipeline with cash at unprecedented levels.
“They are, however, faced with serious headwinds and new forms of volatility including geopolitical uncertainty driving inflation and interest rate increases, the acceleration of the digital economy, a constantly changing tax landscape, sophisticated cyber threats, heightened scrutiny of environmental, social and governance programs and a challenging talent market that puts pressure on people programs and integration.”
Gary Blitz, global co-CEO of M&A and Transaction Solutions at Aon, added: “In today’s environment, it is critical for both strategic and private equity dealmakers to take a wide view to mitigate exposures and make better decisions when approaching financial, tax, legal and other risks.
“Dealmakers are encouraged to identify opportunities throughout the deal lifecycle to secure their assets and enhance their returns as well as examine how transactional insurance solutions can help improve transaction structures and take certain contingencies off the table for buyers and sellers.”
