By Nicholas Renter, Vice President, Product Marketing, Datasite

As 2021 draws to a close, there’s still lots of uncertainty about economics, politics, and global health in the year ahead. What trends can we see taking shape, and what do they imply about prospects for M&A in 2022? To address these questions, Datasite gathered knowledgeable voices from around the industry for this year’s final Corporate Roundtable.

What’s on dealmakers’ minds?

Abby Roberts, Datasite’s Senior Director of Product Marketing, opened the panel with a question: What’s the biggest issue facing corporate development teams right now?

The experts were unanimous in identifying bandwidth as their biggest concern. The record-breaking transaction volumes of 2021 have left firms wondering if they have the resources to make any more deals.

“What I hear [from clients] is the concern that we’re just doing them, getting them done, but the consequences are going to play out in 2022,” said Jennifer Fondrevay, the founder of M&A consulting company Day1 Ready™. “What will be the repercussions of the level of deals that we’re doing is the question.”

Nearly 24% of the audience respondents agreed that bandwidth was their primary issue, while 27% highlighted ROI and around a third pointed to business strategy concerns.

Both the audience and the panel also agreed that inflated valuations posed a major challenge to corporate buyers. Other issues included integrating companies amid a pandemic and regulatory moves from the Biden administration.

Drivers of growth

What about opportunities and reasons for optimism in 2022? Roberts asked the audience what would be the biggest factor fueling M&A growth next year. Suggested answers included the ongoing digital transformation of the economy, AI ventures, supply chain consolidation, or easy access to capital.

“Where is the ‘all of the above’ option?” Gilmore joked. He added that the move to digital solutions and telemedicine promises to be particularly revolutionary for the healthcare field.

Justin Gans, Managing Director of Investment Banking for Monument Capital Partners, predicted that capital access would be the most significant factor. Everyone expects rates to go up, he said - the only question is how much.

“If people have the opportunity to access super-cheap debt before that happens, they’ll do so,” he said.

The panelists also discussed which industries and technology trends offer the most potential. There was broad agreement that the accelerating jump to digital is creating a wealth of new opportunities. As one example, Gans mentioned augmented reality tech, which is creating groundbreaking possibilities in everything from remote medicine to entertainment. Fondrevay also pointed to the ever-growing demand for better solutions in data management and cybersecurity.

Audience Q&A

One viewer asked how to balance the desire for confidentiality with the need to prepare for mergers ahead of time. Fondrevay acknowledged confidentiality needs but believes dealmakers can find ways to bring leaders into the loop sooner. She works with clients to “have the people who are on the front lines - who know how to do the work - involved as early as possible to help co-create and execute the strategy.”

Another audience member asked what kinds of catalysts might prompt a correction of inflated valuations.

Gans suggested two possible triggers. First, some “massive exogenous event” could disrupt the economy or people’s sense of security, such as a worsening of the Covid situation or an escalation of international tensions. Second, a hiccup or a downtrend on Wall Street could prompt a reassessment.

Advice and holiday wishes for dealmakers

The panel ended with some big-picture discussion about risks and best practices in M&A.

Fondrevay said that from her perspective, the most common reasons for failed acquisitions are “unexpected people challenges”. But you can expect the challenges, and plan for them. That includes a mismatch between corporate cultures or expected synergies that don’t materialize.

The other experts largely agreed, and stressed the importance of communication, pre-planning, and attention to the big picture. They also agreed that important quality corporate development teams and executives have to be willing to walk away from a deal when it’s clear that the fit isn’t right.

The group also addressed the question of how to retain key employees following an acquisition. Gans said he’s come to regard the most important factor as a sense of ownership and empowerment.

‘They need to understand what the whole business is trying to accomplish,” he said.

“In the past, the thought was…throw money at people, that’s what holds them,” agreed Fondrevay. “What people are really looking for is growth and learning opportunities.”

Roberts closed the discussion by sharing some results from Datasite’s Global Outlook Survey. Asked what they planned to prioritize in 2022, the #1 response from dealmakers was time with family members. In that spirit, we at Datasite would like to wish all of our readers a wonderful holiday season and a new year filled with new possibilities.