M&A industry trends, globally and in Switzerland: Why you should expect deals activity to remain solid and fiercely competitive, but at the same time keep a close eye on macroeconomic and regulatory developments that could put the market under increasing pressure

Marc Schmidli Partner, Deals Leader, PwC Switzerland 27 Jan 2022

Since we started releasing our M&A Industry Insights into developments in global and Swiss deals in 2020, we’ve seen dealmaking bounce back from the effects of the Covid-19 crisis. While the factors driving this positive momentum remain intact, in the coming months it will pay to keep a close eye on the potential impact of a number of headwinds.

Drivers that continue to shape developments in early 2022 include the intense demand for technology and digital assets spurred by business model disruption, strategic portfolio reviews as corporates weigh up scale versus agility, rich sources of capital from private equity (PE) houses and SPACs (special purpose acquisition companies), and the growing importance of environmental, social and governance (ESG) considerations as a way of mitigating risk and identifying value creation opportunities. However, other factors are increasingly entering the mix, including the risks of inflation, rising interest rates, supply chain issues and regulatory scrutiny.

After a record-breaking year for M&A in 2021, what are dealmakers predicting for 2022?

24% increase in Deal Volumes and 57% increase in Deal Values between 2021 and 2020

Source: Compliance Risk Management: Appling the COSO ERM Framework, November 2020.

Three drivers to keep an eye on:

  • Corporate portfolio reviews will continue to generate deal activity
    Companies’ need to acquire digital and related tech capabilities will continue to drive mergers and acquisitions. Corporates will divest non-core assets to reinvest in higher growth areas, and further demergers are expected.
  • Record levels of dry powder are increasing private equity’s share of deals
    With global PE dry powder running at USD 2.3 trillion, more M&A would appear to be on the cards in 2022. On the other hand rising interest rates, higher multiples and ESG are increasing the pressure on private equity houses to find ways of creating value.
  • Special purpose acquisition company (SPAC) IPOs saw a resurgence in late 2021 and are expected to continue to develop
    SPAC IPOs peaked the first quarter of 2021, but with almost 500 SPACs out there looking to announce a merger, significant capital is likely to be unleashed on M&A over the next two years. This will continue to drive up multiples for sought-after assets.

Outlook for specific global sectors 

In the consumer markets industry, M&A activity looks set to remain strong this year as companies transform their businesses in response to changing consumer preferences. In energy, utilities & resources, ESG considerations are key to corporate strategies as deals reflect the desire to optimise portfolios and access new markets. In the financial services sector, motivated buyers and sellers, rapid transformation and distressed assets add up to a lively year of dealmaking ahead. Mergers and acquisitions activity and valuations in health industries remain high, and there are no signs of a slowdown in 2022. In industrial manufacturing & automotive, robust M&A activity is expected in 2022, as strategic portfolio review and ESG are seen as essential components of long-term value creation. New market opportunities, tech convergence and abundant capital are setting the scene for plentiful dealmaking across the technology, media & telecom industry in 2022.

What about the situation in Switzerland?

Zooming in on Switzerland, the positive M&A drivers we’ve seen in the last few years remain intact, so we can expect dealmaking to remain robust in 2022. However, dealmakers should be paying close attention to emerging risks such as interest rates, inflation, potential supply chain problems and closer regulatory scrutiny.

“ESG will remain an important factor in assessing M&A potential. But dealmakers should also be keeping a close eye on inflation, interest rates, supply chain and regulatory issues.”

Marc Schmidli,Partner, Deals and Valuations Leader, PwC Switzerland