Dealmakers expect more mergers and acquisitions in 2022, says advisory firm

According to a report, almost 60% of dealmakers on the island of Ireland expect more mergers and acquisitions (M&A) to take place this year than in 2021.

nd management consulting firm KPMG’s annual M&A Outlook survey forecasts that 2022 will be a sellers’ market as competition among buyers intensifies.

Just 1% of the 100 advisors polled expected fewer deals to happen this year, suggesting business confidence is high despite long periods of Covid-19 restrictions.

Skills gaps were described as the main threat to transactional activity – but only one in ten saw Brexit as a threat to transactions. Last year was a record year for transactions, with landmark transactions such as the sale of Euro Auctions in Co Tyrone to Ritchie Bros in Canada. According to Experian, the value of deals here had reached almost £3.1 billion in the first nine months of the year.

But even that record year is yet to be surpassed, KPMG said, with 73% of advisors expecting deal multiples to rise. And healthcare and technology have been cited as the busiest sectors for deals.

It was expected that financial buyers such as private equity rather than strategic buyers would lead the bulk of activity.

One of the biggest equity deals of the last year was an investment in Londonderry-based e-learning company Learning Pool by global investment firm Marlin Equity Partners.

Russell Smyth, Head of Deal Advisory at KPMG in Northern Ireland, said: “After an outstanding 2021, the M&A market in Northern Ireland looks set to continue this trend in 2022.

“Dealmakers are optimistic that transaction volumes will continue to rise, while sellers have raised their value expectations as buyers seek high-quality assets.

“Strategic investors are expected to continue to play a prominent role on the buy-side, but it will be interesting to see how the expected increase in financial buy-side activity will impact the market in the coming months.

“Private equity is still fully funded and likely to retain a competitive advantage throughout 2022.”

The green agenda will continue to gain in importance in the M&A market.

“Embedded sustainability is now being demanded by investors, shareholders and regulators, and those companies that fail to demonstrate this focus will be left behind.”

Chris Donnelly, Director of Deal Advisory at KPMG, added: “For business owners considering a sale, ensuring they have a quality team and pipeline of talent is critical, as our survey shows that the race for skills is one of the biggest challenges for companies right now.

“Meanwhile, it is clear that lenders – both traditional and non-bank – are keen to support the Northern Ireland M&A market based on robust fundamentals, while interest rates need to be watched for 2022 as any significant rise whets appetites likely to dampen buyers.”

At 83%, a clear majority of people surveyed by KPMG said they intend to pursue M&A opportunities in 2022.

And nearly three in four respondents expect deal prices to rise in 2022. The skills gap is seen as a risk factor for deals by 39% of respondents.

However, one in four had concerns about inflation, while 15% feared political changes. And about one in ten believed that rising interest rates could hamper transaction activity.

Almost all, at 92%, intended to include sustainability in their strategies for the year.

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