The global M&A industry rode high in 2021, considering the M&A transactions peaked last year. The deal makers were not only relishing a record-breaking year in M&A history but were optimistic that the same trend would keep the industry flourishing in 2022. However, 2022 turned out differently than expected.
Here is what happened in the M&A industry in 2022 and how technology is reshaping the M&A market.
M&A trends and forecasts in 2021-2022
As mentioned earlier, 2021 was a dream year for deal makers. Over 60,000 deals worth $5 trillion were disclosed publicly in 2021.
Although the projections for 2022 were not as high as 2021, 2022 saw a massive downfall in global M&A activities. The value of the global M&A market fell by 20% to $2 trillion in the first six months of 2022.
Factors affecting the global M&A market in 2022
The downfall in the global M&A industry is highly understandable due to high levels of uncertainty.
From geopolitical instability to the Russian invasion of Ukraine, regulatory changes, supply-chain issues, soaring inflation, labor challenges, and skittish capital markets fueled the uncertainty in the global economic landscape. Worst of all, a looming global recession is not helping the cause either.
Telecommunications, media, and technology (TMT), just like in 2021, remained the heavy hitters of 2022. TMT constituted 30% of the overall global M&A deals. Real estate remained 2nd with 13% while industrials remained 3rd with 11%.
Mid-year M&A trends and the future
The global business climate is changing, and with no other options left, deal makers are trying to adapt to these changes. Some may want to sit this phase out, but on the contrary, seasoned deal makers will be looking forward to making bold moves and setting a tone for the next five years.
Modern-day deal makers have set high standards for success; sitting out and waiting for slow returns is indeed not their way of doing things. This also makes things more optimistic, and it is expected that M&As will remain a strategic priority in these times of uncertainty.
Role of technology in global M&As
As the TMT industry was the biggest contributor to global M&A transactions, technology itself had a decisive role in the remarkable success of the M&A industry. Technology, more specifically digitalization, has simplified complex M&A transactions. Today, virtual data rooms have shrunk the distances and made cross-border and cross-continents mergers easier and faster.
Here is an introduction to virtual data room technology and its role in revolutionizing the M&A industry.
What is an electronic data room?
Electronic or online data room software is a secure digital document management platform globally used for data management, deal-making, and corporate communication.
In simple words, data room software is a blend of multiple technologies which you can use to store, manage, organize, distribute and share data during deal-making and other financial transactions.
Not just deal-making, data room services are also highly effective in internal and external communication and managing routinely-used corporate data.
Virtual data rooms and M&As
The M&A industry is the biggest consumer of virtual data rooms. The following are the top benefits of data room software in M&A transactions.
1. Secure and speedy data sharing
Traditional M&A data-sharing approaches were not only time-consuming, but the chances for human error were also high. The inability to provide timely access to M&A documents can affect the outcome by a great deal.
Virtual data rooms not only make data sharing faster, but they also provide a centralized place for data storage. Centralized cloud-based document repositories are remotely accessible, which means the deal makers, advisors, and other parties don’t have to fly back and forth for due diligence.
2. Fast communication
Fast and safe communication is key to boosting the chances of a successful transaction. Online data room software provides deal makers with a digital place easily accessible to everyone. Online data rooms are used as a medium of communication between corporate boards, investors, stakeholders, deal makers, advisors, and anyone participating in the transaction.
Electronic data rooms have meeting management tools that can accommodate hundreds of participants simultaneously. VDRs also boast Q&A modules specifically designed for these types of transactions.
3. Multiple opportunities for deal makers
The best thing about virtual data room software is that dealmakers can initiate talks with multiple bidders and choose the best offer. Target companies or deal makers can make multiple data rooms, upload due diligence documents, and communicate with different buyers at the same time.
4. Cost reduction
Where electronic data room software has minimized manual workload and ensured faster data sharing, it has reduced the costs of M&A transactions significantly. Using VDRs, deal makers can minimize paper and printing costs, meeting expenses, and travel costs.
Some of the best M&A virtual data room providers include iDeals, Caplinked, DealRoom, Firmex, and Merrill.
Final words
After a skyrocketing success in 2021, the global M&A industry has slowed down in 2022. However, despite economic turmoil and a sense of uncertainty, M&As remain a major strategic element in the corporate sector.
Virtual data rooms remain the leading technology solution to support M&A deals. They offer solutions for secure and speedy data sharing, fast communication, cost reduction, and multiple opportunities for deal makers.
If you consider implementing a data room in your next M&A deal, consider conducting a data room comparison to make an optimal choice. Some of the best data rooms to go for in 2022 include iDeals, CapLinked, Dealroom, Firmex, and Merrill’s Datasite.
