Economic experts, entrepreneurs, mergers and acquisitions (M&A) professionals, investment bankers and their advisors remain generally optimistic about the outlook for M&A in 2022. In fact, it follows the trend of 2021, which was a historic year for this sector with a record number of transactions worth €10.623 billion in Europe.
Corporate transactions in Europe
In 2022, government stimulus continues and there is plenty of liquidity in the market. In addition, large corporations are reinforcing their inorganic growth plans with a strategy of focusing on their core business, in exchange for divesting those lines of business that are not key. Private equity funds continue their investment escalation, so that in 2021 they accumulated 39% of all transactions at the European level. They continue to diversify both in terms of turnover and EBITDA of their targets, as well as the type of structures of their operations. As a result, more and more investment funds are entering into minority positions to drive SME growth.
Transactions carried out by investment funds
However, there are also headwinds ahead. The consequences of the war in Ukraine are still uncertain and will have a major impact on energy and commodity prices, which are bound to affect future transactions. Not to mention other factors such as rising interest rates, possible new variants of COVID-19 and government control over certain strategic acquisitions. Despite this, and almost two years after the COVID-19 pandemic, companies, private equity and M&A experts have also learned to work in this environment, incorporating uncertainty into decision making and improving process efficiency in order to mitigate risks, which encourages corporate transactions to continue to take place. In short, all indications are that 2022 will continue to be an exciting year for the M&A sector, and companies will need to be on their toes to fine-tune their strategies and take advantage of this window of opportunity that comes with strong investment interest.