Despite A 21% Decline In M&A Activity, 2022 Is Still Poised To Become Second-Best Year On Record

This year started off on rocky footing that’s made many investors nervous. In the mergers and acquisitions (M&A) markets, worldwide activity decreased 21% in the first half of 2022 compared to the same period last year.

Both the average deal value and the total number of transactions declined. For business owners looking to sell their business, news like that is understandably worrying. 

Some might even be reconsidering whether this is really the right time to sell. But when digging a little deeper into those numbers, the actual state of the M&A markets are more complex and may not be as bad as those scary headlines make them sound — at least not for the lower to middle segments of the market. 

How Much Worse Off Are M&A Markets Really?

According to S&P Global, there was roughly a 9% drop in the number of deals between the first quarter of 2021 and the first quarter of 2022. Even with the dip, the first quarter still saw more deals closed than the same period in 2019 or 2020, making some analysts estimate the year could end with $4.7 trillion in total deal value. 

That’s behind the record-breaking $5.9 trillion in M&A activity in 2021, but it would still make 2022 the second-best year on record.

For lower to middle markets, for businesses valued at under $500 million, the trends are even more heartening. Not only is the drop in the number of deals not as steep, but analysts expect geopolitical conflict and COVID-19 to drive more M&A activity — not less — in this segment. Consolidation is one of the key strategies for weathering the added pressures of uncertain economic conditions.

Plus, last year, private equity firms were raising tons of capital, but they won’t actually get paid until they deploy that capital. According to Exitwise CEO Todd Sullivan, “There is more than $1 trillion that needs to get deployed.” So, uncertain conditions or not, markets are still likely to see a lot of M&A activity across many sectors.

Is The Key To Selling A Business In 2022 Finding The Right Buyer?

Economic history often points to the idea that you can’t time the market. Sitting on a business because you think this isn’t the right time to sell can theoretically end up being a riskier move than selling in an uncertain climate.

But that doesn’t mean a company just needs to find the first buyer it can and sell for whatever they offer. Getting ducks in a row first might be a big help. Businesses should arguably prepare to be sold and reach out to the right investment bankers, M&A attorneys and tax accountants who know their industry.

Companies like Exitwise, for example, connect clients with a growing network of M&A experts who specialize in specific industries to attempt to get the best possible deal. Exitwise says that it works with thousands of tax accountants, investment bankers and M&A attorneys with specialized expertise across hundreds of industries.

Exitwise also reports that its network of industry-leading M&A experts have deep relationships with buyers like Activision Blizzard Inc. ATVI, Microsoft Corp. MSFT and L’Oreal SA LRLCY that are often looking for M&A opportunities, regardless of market conditions.

Companies may not be able to time the market, but with expert help, they can at least hopefully make sure they’re doing everything in their power to get the best outcome, no matter what market conditions are.

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