An eventful year for M&A in 2022?

A few reflections coming out of the 34th Annual Tulane Corporate Law Institute gathering, for those who missed it:

New Orleans, we sure missed you!

The city embraced us and we embraced it right back--breaking bread together, soaking up the city’s charms, and spinning stories from a frenetic 2021. The excitement was palpable, and I, for one, fully embraced it!

2021 was pretty momentous. 

That sound you hear is all the M&A deal records being shattered. Public company valuations soared, and PE was awash in liquidity. We saw competition from SPACs on the prowl, oh-so-attractive borrowing costs, and refi’s everywhere. The M&A business was definitely not a bad place to be this past year (and if you focus on TMT, well even better).

Disruption is the central reality of our times.

Companies are shifting from navigating COVID to navigating the return to a hybrid normal. Geopolitical uncertainty and forces of deglobalization are fracturing our post-Cold War order. Supply chains were disrupted, then started recovering…only to be disrupted again. Inflation. Changing consumer trends. New technologies and business models. Climate change and ESG. Where is it all going? It will take a while to sort out, and in the meanwhile, the pressure on growth and returns is increasing.

Where are we headed in 2022?

I’m glad you asked. To oversimplify, expect ample deal activity driven by shareholder growth expectations and PE dry powder—maybe not breaking new records but a respectable year nonetheless. Business will continue to feel pressure from shareholders, regulators, and activists big and small. Activism will continue to impact the appetite of companies to stretch on deals, as both a carrot and a stick.

What should I be thinking about?

From my vantage point, the level of uncertainty has rarely (never?) been higher. Synergies really have to be there. Execution (fast execution) has never been more critical to make returns, especially with multiples and valuations where they are now. The CEO who can steer the ship through these waters is a rare and valuable commodity. Managing disruption is the new table stakes. Thriving in it is the new competitive advantage.

As I turn my eyes back to the rest of 2022 and beyond, there are many questions and few answers that are simple or certain. It promises to be an eventful year!