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Mergers and acquisitions in 2022: our top learnings and predictions

Launching LAVA during a worldwide pandemic was a huge risk. But, our instinct and confidence paid off, with our market debut coinciding with a record-breaking year for the M&A world.

By October, 2020’s full-year value had already been surpassed, with pending and completed global deals totalling $4.4 trillion, marking a 92% increase on the previous year.

Despite a slightly slow first quarter, UK markets matched the global appetite for deal-making. Opportunities that had built up throughout lockdown were met with strong equity markets, low interest rates and overseas interest to drive a record number of transactions during the period of January to June, with momentum set to continue throughout Q4 of this year.

While we anticipate the results of the upcoming end of year reports, the LAVA team have been reflecting on their key learnings from 2021, forecasting dominant and emerging trends that look to shape the industry over the next 12 months. 

From the impact that data will have on future deal-making to the rise of ESG on investor agendas, here are our top M&A learnings and predictions for 2022.


1. Investment in post- COVID culture and working practices will be fundamental for long-term success Simon Woodcock, Partner


Key 2021 Learning:  Events over the last two years have forced many businesses to change the way they operate and how they interact with their customers.

Those that have made the greatest gains are the organisations that have given their teams the most autonomy to foster an empathetic and agile culture whilst supporting this with real investment in underlying business systems, processes and working environments. Those that fail to invest will be found out fast.

Top Prediction for 2022: Cultural fit in transactions will play a leading part in dealmaking in 2022. Dynamic, mid-market companies that have used 2021 to reset and position themselves for a changed and changing world will be hot targets for buyers in 2022.

Short term gains during the pandemic have been captured by many; however, those that have relied on discretionary effort from their employees will fall short compared to those that have invested in making new working practices sustainable.


2. Expect funding momentum, growth and creativity to soar – Claire Davis, Partner


Key 2021 Learning: Capital being in abundance is nothing new, but expectations that the pandemic would stall funders’ appetite for the long-term have been overthrown by the market being saturated with attractive funding options, from sector-focused private equity houses and family offices to alternative debt lenders and venture capitalists.

But it’s not just the availability of funding; it’s the willingness that funders are exhibiting to be creative and flexible to make the right deals work.

This is helped by some really positive outcomes for businesses that traded exceptionally well through the past 18 months, either due to their specific activity or changes in their business model.

Top Prediction for 2022: The funding landscape is unlikely to change dramatically. M&A transactions are likely to increase in volume as time passes since the start of the pandemic, and financial results are easier to quantify. The appetite to invest in companies with ambitious teams, hot sectors, and exciting growth prospects will become ever greater.


3. Legal tech becomes a stakeholder priority as data continues to define deals Hamish Martin, Partner


Key 2021 Learning: “Data” is a key topic becoming prevalent in our conversations with companies, particularly around how they can monetise and seek value for their data. 

When speaking to acquirers and investors, this is a key consideration when assessing potential targets, and they are also interested in how it can be used across a transaction lifecycle (through origination, diligence, execution and implementation) to improve efficiency and effectiveness.

Top Prediction for 2022: As the sheer volume of the data being generated continues to grow exponentially, those businesses that can effectively store, analyse and exploit their data will see their competitive advantage grow over their peers. 

At the same time, data protection (both from ethical and security standpoints) and the use of responsible Artificial Intelligence (AI) are increasingly on stakeholders’ agendas; ensuring ethical methods are used will be essential to avoid damaging financial and reputational blunders.

4. Seeking a competitive edge, businesses and investors won’t be playing it safe – Tom Rowe-Jones, Associate Director


Key 2021 Learning: The experiences business owners and individuals have been through over the last two years have forced them to adapt, making organisations and senior business leaders more amenable to change. 

This has, in some cases, resulted in investors, business owners and management teams drastically altering their business models in a timeframe that was previously unimaginable in order to survive (e.g. tutoring organisations moving online, brands adopting e-commerce routes to market). 

The key takeaway is that successful businesses have embraced organisational change, aren’t afraid to question themselves, and will need to continue to do so if they want to become market leaders.

Top Prediction for 2022: Investors and businesses won’t be afraid of, and will even be looking for, more ‘challenging’ M&A opportunities in order to gain an edge over market incumbents. This will be in the form of more cross-border, cross-sector and vertical integration mergers and acquisitions than we have seen previously. 

Stakeholders, now more comfortable with change and supported by recent technological advances, aren’t as fazed by complex integration challenges or operational considerations. They can therefore focus more on realising upsides that were previously perceived as unachievable from transactions such as commercial synergies, technological innovation and cross-industry collaboration.


5. ESG activity will hold greater influence over growth opportunities Dorota Filipkowska, Associate Director


Key 2021 Learning: The numerous conversations we are having in the market indicate that all institutional investors have firmly placed ESG on their agenda, whether through the inclusion of ESG due diligence, ESG-driven metrics at the investment stage or a launch of dedicated impact funds, which concentrate on businesses that are actively making a difference for the society and the planet. Greenwashing should be left long in the past.

Top Prediction for 2022: Businesses that did not pay attention to their ESG agenda across all aspects of their operations will face increasing pressure from their clients and potential investors and need to take note.

As the UK is looking to lead the way in cutting emissions and promoting clean solutions, we predict that the UK businesses tackling the environmental challenge will quickly climb investors’ agendas.


6. Further challenges and opportunities will arise from fragmented niches Millie Counsell, Analyst


Key 2021 Learning: The past year has highlighted how many consolidation opportunities are still to be had. This can be seen in the early years sector, which remains highly fragmented, with approximately 80% still privately owned.

COVID has also presented many opportunities for “buy and build” platforms, as owner-managers grew tired of repeated lockdowns, tightening Ofsted requirements and ongoing recruitment issues, making them look to exit their businesses.

The early years sector is starting to see consolidation in the same way that the veterinary industry did a couple of years ago.

Top Prediction for 2022: The question going forward will be whether these platforms can cope with rapid growth while still retaining the qualities that made them successful in the first place.

Platforms that failed to invest properly at the start of their journey will begin to face operational issues, as well as potentially lose out on future acquisition opportunities. Platforms that invested heavily in their back-office and infrastructure, although it may have seemed excessive for the size of the business at the time, will in time, reap the rewards and returns.

The most successful platforms, especially in the early years sector, will be those that learn to integrate acquisitions without losing the culture of their targets and themselves.


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