Mergers and acquisitions are expected to rise in 2022: Survey

Todd Albright, Datasite’s Chief Revenue Office, will attend the Yahoo Finance Live panel to discuss the outlook for M&A deals in 2022.

Video transcript

EMILY MCCORMICK: 2021 was a record year for dealmaking. In the first three quarters of the year, global merger and acquisition activity hit an all-time high, with more than 27,000 deals closed, valued at $ 3.4 trillion. We welcome Todd Albright, Datasite’s Chief Revenue Officer, for more now. Todd, thank you for joining us this afternoon. When you look back on the incredible volume of transactions this year, what do you think were the biggest factors in the marketplace that really contributed to it?

TODD ​​ALBRIGHT: It’s very nice to be with you today, Emily, and on the show. I have to say we have been in a bull market for M&A since June 2020. If you look at the deals that took place on our platform, we are 34% year-on-year since the start of the year. And again, it’s all the more amazing when we get past COVID. Remember that the offers we see on our platform are at launch, not advertised offers. This gives us visibility in the market six to nine months after the actual occurrence.

But this is also a low interest rate environment. And especially in the age of COVID, you see securing the future of the company through very aggressive measures, especially in technology, where, according to our data, the transaction volume has increased by 44% compared to the previous year, and then on certain combinations that would do so in competitiveness Increase the future.

JARED BLIKRE: Let’s talk about the low interest rate environment. And the fact that the Fed is reducing its throttling is also largely liquidity-driven. So we could have slightly higher rates next year. But I find in your survey of 600 deal makers that 48% of them expect the M&A lightning bolt to increase and we will have another record year in 2022. Just your opinion on this in general.

TODD ​​ALBRIGHT: Well, nothing in our data suggests otherwise. And again we surveyed 600 deal professionals. And again, deal professionals or dealmakers in our language are investment bankers, corporate finance professionals, private equity professionals and all legal, tax and other advisors who serve the M&A industry.

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And the view is with – while the Fed may be tightening and we may see rates hike, that doesn’t change the fact that historically there are really low rates and plenty of private capital, especially in the private equity communities at Am Rande and then also debt financing, so we expect a further increase.

EMILY MCCORMICK: Also referring to your survey, 71% of respondents said inflation affected an M&A deal they worked on this year. In what way do you think inflation has affected the headroom?

TODD ​​ALBRIGHT: Well, it really did affect the valuations of the deals as the cost of capital continued to drop, but the cost of doing business continued to rise. And that affected it to some extent. A second factor might just be general business metrics and future performance. We’ll see how that plays out over the next few months. But as you noted in the survey, most of the acquisitions we hear from our dealmakers are really going to be aimed at growth. And that growth will come organically from the companies that buy them, but also revenue synergies where you bundle the products you have with the products you purchase to drive that growth.

JARED BLIKRE: And I was just about to ask you that. So I’m going to ask you a little separate question here. Another fact from your report is that 89% of dealmakers were more selective in picking dates to postpone within 2021 due to bandwidth constraints, high valuations, or macroeconomic concerns. It sounds like the deals that couldn’t be closed this year alone could create a lot of catching up to do because everyone was too busy. Your opinion on this? Is that your conclusion, or is it just that we have enough space in 2022 to make it a record year, a banner year of its own?

TODD ​​ALBRIGHT: Well, it’s a very smart point, Jared. I mean, what we saw is, if you look at it earlier, in the fourth quarter we saw some slowdown as people were trying to get deals. But what we’ve seen in the past six to eight weeks is that the deals on our platform move 34% up and back to the right. That doesn’t stop in the fourth quarter either. And we all agree with you that one of the things that has honestly slowed down – again, we’re at a breakneck pace of mergers and acquisitions, but if there’s one thing that’s slowing it down, it’s probably human intensive work which leads to a due diligence process to be done.

So what we see in many forward-looking companies – M&A consultancies, in turn corporate finance experts – is that they really rely on technology. And that’s exactly where we fit. Again, we are a utility, workflow content management, all very safe, that helps merchants close deals faster. We invest in AI technologies that essentially automate and streamline the process of preparing, delivering diligence materials and then automated querying and performing due diligence. And I think you will see relief in this human intensive work through the use of technology. Datasite fits into the process.

EMILY MCCORMICK: What are your prospects for SPAC mergers over the next year? Because of course we had a really strong start to 2021 in terms of this type of deal-making. Something ran out in the middle and later half of this year. Where do you think we will go on this front in 2022?

TODD ​​ALBRIGHT: Difficult for me to predict. But again, our indicators say the SPAC markets will continue to be strong, if only because you had a record number of launches this year. And these blank check companies have to do business within the next two years. The fact that you have had a number of issues will put pressure on the market to close deals. And so we would expect SPACs – and these SPACs – to continue.

JARED BLIKRE: And I want to come back to your answer regarding the technology you are using. I did – I started due diligence in the mid-1990s, and I used a phone, paper and pen, lots – emails were just made up or just adopted. Particularly in the pandemic era, what tools are people using instead of the many face-to-face meetings that used to take place and are no longer as frequent as they are today?

TODD ​​ALBRIGHT: I mean, Jared, whenever you want to get back into the M&A industry, feel free to speak to us at Datasite. But I think the most important thing is that a lot of M&A before the pandemic was face-to-face. And then suddenly we passed into an era of zoom-enabled meetings. And so you travel less, you have more meetings in Zoom. And these are not just mergers and acquisitions, but also IPO roadshows, financing and raising capital. All of these things are now much more efficient.

I spoke to an investor the other day. He is in the process of launching a new multi-billion dollar fund. And I said are you on your way? And they actually built a studio in their offices to do virtually all of their fundraising virtually. And with that, moving to virtual work – and of course I can’t help it – is helping myself, but a lot of the investments that companies like Datasite are making, especially in relation to artificial intelligence and enabling, you know, the rich history of mergers and acquisitions, which makes it possible to support the automated execution of work and tests, as opposed to what was previously done manually by younger professionals in this branch, also speeds things up.

EMILY MCCORMICK: All right, let’s leave it at that for now. Todd Albright, Datasite’s Chief Revenue Officer, thank you for your time.

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