01/02/2022

With over 30 years’ experience in national and international corporate law, there can be few people better qualified to provide their thoughts on the shape of the mergers and acquisitions market than Corporate Partner Baljit Chohan.

We put some burning questions to Baljit to draw out his expert view on current trends in M&A:

Pandemic notwithstanding, 2021 did not diminish M&A activity. Do you see this trend continuing in 2022?

2021 was a record year for global mergers and acquisitions marking a remarkable rebound from 2020, despite lingering uncertainty caused by the pandemic. The drivers behind that growth included low interest rates, the rate of sterling, continued economic growth supporting corporate confidence and record reserves of available capital sitting with private equity.

These elements remain in place so it is fair to say that we should expect another robust year for M&A, perhaps not record breaking in the same way (although the Microsoft acquisition of Activision Blizzard for $75bn may indicate otherwise!).

Any dampening effect will come from interest rate rises, the continued supply chain issues and labour shortages and increased regulatory scrutiny in sectors (energy and other critical national infrastructure being particularly high on the regulatory radar). The threat of impending interest rate rises may lead to an acceleration of activity as the costs of borrowing increase and the value of cash reserves is reduced.

Some sectors, which are still in the pandemic recovery phase, may see a delay in M&A activity but the signs for 2023 in these sectors look promising. These include travel, leisure and aerospace.

What new trends do you see in M&A transactions?

It is fair to say that deal making will continue to be ‘virtual’ even if the end of the pandemic is in (long) sight. We are seeing transactions being handled through technology which involves ‘virtual’ meet and greet between Buyer and Seller avoiding travel. ‘Virtual’ due diligence through deal rooms has been the norm for a while but we are now seeing this happen in relation to physical due diligence – think drones being used to tour a facility instead of an in-person visit!

‘ESG’ is an acronym that we will all be hearing a lot more of going forward. It stands for ‘Environmental’, ‘Sustainability’ and ‘Governance’. ESG is becoming a factor in evaluating M&A transactions particularly for international businesses driven by market and regulatory pressures. ESG has been used as a risk management tool i.e. to identify the risks of a transaction (for example assessing the ethics of a supply chain) but is increasingly being used as a way of increasing value. For example, it opens new avenues with ESG-focused investors and promotes positive engagement with customers, suppliers and employees. From an acquisition perspective, this can enhance the value of an acquisition.

How are you geared up to assist clients in M&A?

We welcome the opportunity to speak to businesses about their business! While our client work is confidential, we love to share the insights we glean from the businesses we advise and work with and provide our thinking on current events. We firmly believe that the best advice we can give is beyond legal. We deliver eye-popping client service and first class technical skills and a real desire to work with businesses to build a better more sustainable future.

If you have questions about mergers, acquisitions or how to sell your business, you can talk to Baljit or any member of our corporate and commercial law team by phoning 01782 205000 or emailing enquiry@beswicks.com.