M & A is likely to remain strong in 2022 as Covid-19 approaches its business plan

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Companies are preparing for the next banner year to trade.

The merger and acquisition set a record in 2021. This is driven by low interest rates, a surge in private equity financing, and corporate efforts to respond to broader changes in the industry. By December 21, global M & A transactions totaled $ 5.7 trillion, up 64% from the year-ago quarter, according to data provider Refinitiv. Meanwhile, the total number of transactions increased by 22% to 59,748 during that period, Refinitiv said.

M & A lawyers and advisors said many of the factors driving the deal in 2021 are expected to continue next year. However, policy changes in the near future may slow the pace of business alliances, including: Rising interest rates From the Federal Reserve (which may increase the cost of financing a company), Increased oversight from antitrust authorities.. According to the advisor, it is not yet known whether a new variant of Covid-19, such as Omicron, will affect a company’s transactions.

“We look at the big trends that have been going on for years and say,’Are they likely to continue?’ And our conclusion is, generally speaking, they are. It’s likely to continue next year, “said David Harding, an advisory partner to professional services company Bain & Company.

Throughout the year, companies used the pile of cash they had accumulated to pursue M & A in the early days of the pandemic. According to S & P Global Market Intelligence, cash and equivalents of S & P 500 companies increased 11% in the third quarter to approximately $ 3.78 trillion compared to the year-ago quarter.

Blockbuster

Transactions included

AT & T Ltd

When

discover Of a corporation

Decision to consolidate media assets To be a new listed company. Under this agreement, AT & T will receive $ 43 billion and once the transaction is completed, AT & T’s shareholders will own 71% of the new company.

AT & T and Discovery have decided to integrate their media assets into a new publicly traded company.


Photo:

Stephen Senne / Associated Press

Another big deal is Square Inc this summer.Includes relocation Buy a company to buy later

Afterpay Ltd

With $ 29 billion

Oracle Corp.

This week’s agreement Acquired a medical record company

Sarner Ltd

At $ 28.3 billion. Earlier this month Square changed its name to Block Inc.

The chief financial officer of the acquiring company has undertaken high valuation in deciding whether to commit a transaction. “The difference between the current boom and the previous boom is that it is less price sensitive, especially in the technology industry,” said Michael Diz, co-chair of the M & A group at law firm Debevoise & Plimpton LLP.

According to Bain, in 2021, transaction multiples (calculated as the ratio of median corporate value to interest, taxes, depreciation, and pre-amortization revenue) increased across the industry compared to the previous year. .. The technology and healthcare sectors recorded the highest multiples, 28x and 24x, respectively.

ChargePoint Holdings Inc., a manufacturer of electric vehicle charging stations based in Campbell, California, has completed two acquisitions this year to expand its business in Europe. It acquired the software company Has-to-be for about € 250 million, worth about $ 283 million in cash and stock, and the fleet electrification company Viri Citi for about € 75 million.

img 61c46414471b2

ChargePoint CFO Rex Jackson.


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ChargePoint Holdings

Chief Financial Officer Rex Jackson said the company undertook two transactions with the intention of having a choice. “The space is so well-valued that it’s expensive, so make sure you get what you need,” Jackson said of the company’s target selection.

Many companies during the pandemic revisited their portfolios and made the following plans in 2021: Sell ​​business line also Buy a company As a means of expansion. For example, some have acquired technology companies to improve their digital capabilities, while others have scooped up competitors to increase sales.

Signet Jeweler Ltd

In November, Diamonds Direct USA Inc, a retailer of bridal jewelery based in Charlotte, North Carolina. Was acquired for $ 490 million in cash. According to Joan Hilson, the company’s chief financial officer, the deal aims to help Signet increase sales of what it calls “accessible luxury.” “The market is very strong in that tier and we believe there is room for more market share,” Hilson said.

According to Bain’s analysis of data from financial information company Dealogic, this year’s merger with a special acquisition company will account for 11% of global transactions from 6% for the full year 2020 to December 8. I did.

img 61c46416eeb6b

ChargePoint Charging station.


Photo:

The Wall Street Journal Sergio Flores

This year’s growing investor interest in SPACs is expected to drive additional transactions in 2022. This is usually a pool of cash that is essentially listed for companies 2 year window Make an acquisition. According to Brian Salsberg, Global Head of Integration Practices for professional services firm Ernst & Young, SPAC is a broad stimulus for closing deals by encouraging companies that may not be ready to sell. It may work.

Private equity and venture capital firms have also increased their share of total M & A transactions in 2021 by about 2 percentage points from 2020 to 19% and 8%, respectively, Bain said.

Towards 2022, many economic factors suggest that closings remain strong, including growth in the United States. gross domestic product, Strong corporate profits When Cash balance of large companiesColin Whitmer, Deal Leader of PricewaterhouseCoopers, a US accounting and consulting firm, said.

Still, US regulators are applying more scrutiny to large-scale transactions, especially in the tech sector, Deal Advisor said.Earlier this month, the Federal Trade Commission appealed to block U.S. chip makers

Nvidia Corp.

Acquisition Proposal Arm Holdings, a semiconductor company. FTC President Lina Khan said she Aiming to challenge more corporate mergers It is considered an exclusive practice.

Nonetheless, the advisor said companies are looking for ways to make the cash raised during the pandemic work. Sales of US investment grade bonds fell slightly in 2021 from the peak of 2020 when companies built liquidity to survive the pandemic economic shock. By December 21, companies had raised $ 1.4 trillion by selling such bonds, down 22% year-on-year, according to Refinitiv.

The continued surge in private equity funds will also contribute to the 2022 M & A. Especially in technology Said the advisor, the healthcare sector. According to Refinitiv, private equity and venture capital firms have raised about $ 1 trillion by December 21, up 35% from the end of 2020.

It’s too early to say whether next year will exceed the M & A record set in 2021, but corporate advisers said there seems to be little factor slowing it down significantly.

Write to Christine Broughton Kristin.Broughton@wsj.com

Copyright © 2021 DowJones & Company, Inc. all rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

M & A is likely to remain strong in 2022 as Covid-19 approaches its business plan

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