Download our Second Quarter 2022 Mergers & Acquisition Update Here

M&A activity softened again in the second quarter, driven by a number of factors: geopolitical tension and warfare, continued inflation and supply chain issues, the worst first-half of a year for market performance since 1970, and rising interest rates.
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Roughly 4,570 North American deals were completed during the quarter, for a combined value of nearly $550 billion. Volume remains relatively high to historical levels, while overall value matched that of a 12-quarter average.
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On a positive note, valuation levels rebounded sharply from a weak first quarter. This is encouraging to see, as it suggests we’re not entering a firesale-type of environment and that buyers are still willing to pay up for quality companies.
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As we approach the end of the third quarter, we are hopeful that easing fuel prices and grain shipments commencing out of Ukraine will soften inflation, and we hope the market recovering from mid-June lows will increase investor confidence. Yet, we are acutely aware of the persisting challenges ahead.

Download our Second Quarter 2022 Financing Update Here

Following a record quarter of deal volume, preliminary estimates show a decline in early-stage investing activity of 24.5%. Meanwhile, IPO fundraising has been a mere fraction of what we experienced in 2021, and stock markets, as a whole, are down this year, suffering the worst first-half of a year since 1970. This has been brought on by already-tight supply chains and the Russia-Ukraine war driving prices – and inflation – significantly higher. To combat inflation, the Fed has risen rates from near-zero in the first quarter to a range of 2.25-2.50% as of late July. More rate hikes are expected, and capital markets are showing hesitation to put money to work. Furthermore, banks are making it harder to borrow, raising lending standards and spreads on loaned funds. 
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Despite the gloom and doom rhetoric, investors remain flush with cash, fundraising has been particularly strong during the quarter, and there remain sectors of growth to which investors are more than happy to deploy capital.

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 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 & Acquisitions 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.