Paul Inouye says that for anyone keeping score, 2021 was the biggest year in history for mergers and acquisitions. That’s putting it lightly; it shattered previous records and essentially erased any slowdown caused by the pandemic.
Through the first quarter, 2022 is another big year, and some clear trends are driving everything in the tech space. Inouye has some key findings that will help you navigate tech M&A for the rest of the year.
Rampant Restructuring
A Deloitte survey run at the end of 2021 found that more than half of all respondents have plans to restructure. Restructuring can apply to changing working capital; general reorganization moves to lower costs and full-blown exit strategies.
Paul Inouye says that with so many companies looking for restructuring, M&A is poised to remain hot in 2022, and that has been the case so far. Restructuring represents a prime opportunity for both mergers and acquisitions, and it appears to be driving both through the first quarter of 2022.
Deals Are Getting Bigger
The same Deloitte survey found that most companies expect the average size of deals to continue to grow. While this won’t necessarily prove to follow a linear growth model every year, generally, the size of deals is getting bigger.
There are primarily two factors pushing this notion at the moment. One is inflation across the globe. If the money supply is up, deals will likely reach larger total sums.
Second, the tech sector grew the most in the pandemic. This pushed up the value of the average tech company considerably, and that value is now up for grabs in the form of restructuring and other avenues for M&A.
Paul Inouye explains that whether or not average deal sizes will eclipse 2021 is hard to say, but so far, 2022 is tracking well above non-record years.
Many Divestitures
More than half of the companies in the survey said that they have engaged in divestitures in the last year. Clearly, that was a significant driving force in the M&A records that were obliterated in 2021.
Another third of surveyed companies are considering divestiture this year. This is a signal that while M&A is poised to remain strong, it could slow down by the end of the year — at least relative to 2021. Combine that with rising inflation and global uncertainty, and it would not be surprising if 2022 were ultimately a slower year.
Despite that, 2022 is still on track for very high M&A values as compared to the rest of human history, so it’s still a good time to make a deal. Whether you are trying to improve your holdings or exit entirely, 2022 is a good year to move forward with your plans. Paul Inouye is here with expert advice. As long as you are prepared to do your homework and move swiftly, 2022 could be a big year for you.
