Download Our First Quarter 2022 Financing Update Here

Q1 capital market activity declined from the record-breaking levels of 2021 but was still historically high. In fact, PitchBook estimates that the first quarter may set a record in venture capital deal volume when factoring in deals that have not yet been reported.

Growth equity investments were strong, early-stage investments generally had a dip, and IPO markets decreased more significantly.

It has been well-known for a while that inflation was like to become a concern after the significant stimulus injected into the markets. However, the exacerbation of price increases by a variety of factors, including the Russia-Ukraine crisis, contributed to the potential market slowdown and volatility.
It should be emphasized that investors are still flush with cash. Even if the final figures for Q1 do not exceed 2021 levels, the quarter’s deal volume was higher than the individual quarters of 2020 and prior years.

With the Federal Reserve on track to raise its key interest rate a further six times in 2022, we will closely monitor how borrowing costs impact financing activity – particularly valuations. We also anticipate that we may see a shifting of investment activity between sectors as some become more out-of-favor while others become increasingly attractive.

As always, contact us if you would like to receive information about activity in your specific industry or geography, or if you would like to discuss options for your business.

Download our First Quarter 2022 Mergers & Acquisition Update

M&A activity slowed in the first quarter, while valuations fell sharply.

The volume decrease was generally expected as the buyers and investors we spoke with in Q4 generally indicated that they were in a full court press to close deals by year-end and weren’t building as much of a pipeline for Q1. However, for large deals, it may have also been exacerbated by Russia’s invasion of Ukraine and inflation concerns.

The ongoing crisis has pushed commodity prices considerably higher. For example, wheat rose as much as 50%. The Federal Reserve is expected to make an additional six interest rate hikes after its first in March, which is expected to further slow investment.

Nonetheless, from a historical perspective, first quarter activity was still relatively strong. More than 4,700 companies exchanged hands with a total value of more than $600 billion. And we’d be remiss if we didn’t note that investors are still flush with cash.

Valuation levels overall fell sharply during Q1. While we anticipated a decline from historical highs, it was much sharper than expected. We anticipate that both deal volume and valuations may bounce back a bit in Q2 as buyers and investors have been replenishing their deal pipelines after the year-end rush.

We have weathered a few highly uncertain years now, with new challenges arising at the start of 2022. While current trends are slightly concerning for overall M&A opportunities, we continue to believe there is significant demand for strong companies with favorable growth prospects.

As always, contact us if you would like to receive information about activity in your specific industry or geography, or if you would like to discuss options for your business.