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Putting the pieces into place: The next drivers of strategic M&A

  • Lithuania

    18-07-2022

     

    The next drivers of strategic M&A report recently launched by Eversheds Sutherland discusses the key considerations for stakeholders when carrying out strategic M&A in the current environment.

    Business leaders are facing uncertain times. At the start of 2022, seven in ten business leaders believed that their organization’s appetite for M&A activity would increase significantly over the next 12 months. However, in April 2022, 90% of business leaders said that the ongoing war in Ukraine and its associated effects are causing deals to be stopped or postponed to some extent – with one in five (21%) claiming that their organization is postponing all M&A activity.*

    However, organizations continue to face the same urgent strategic gaps – in skills, technology and logistics – that need to be bridged in order to grow. Despite this turbulent landscape, business leaders still recognize that M&A offers a fast-track solution to unlocking strategic value.

     

    Part one: Future drivers of business success: Talent, tech and trade – the new M&A triarchy

    The research reveals that M&A is increasingly being driven by the need to satisfy strategic demand for talent, tech and trade capabilities in order for organizations to evolve. Together, talent, tech and trade form a new M&A triarchy.

    • More than 70% of business leaders view talent, tech and trade as the key levers of growth and core to their future business strategy.
    • Talent: 72% of business leaders see talent retention and acquisition as important to their organization’s business strategy over the next year. Three in five (62%) also believe that the “Great Resignation” is acting as a catalyst for M&A as the battle for talent continues.
    • Tech: Tech has been among the most important factors of organizations’ business strategies over the past year, with 78% of business leaders seeking to improve their cybersecurity and three-quarters seeking digital transformation. Seventy-four percent also see digital transformation as important to their organization’s business strategy over the next year.
    • Trade: Impacted by supply chain disruption and trade sanctions, 68% of business leaders indicate that increasing supply chain resilience will be a strategic M&A priority over the next year. 72% of business leaders also see increasing supply chain resilience as important to their organization’s business strategy over the next year.
      • In April 2022, 60% of business leaders said supply chain dislocation as a result of the war in Ukraine would make vertical integration an increasingly important business strategy.

     Part two: What dealmakers value

    When suitable acquisition targets seem limited but liquidity is high, what makes one target more desirable – and therefore more valuable – than another? Acquirers view brand and reputation as creating the most added value.

     

    • 77% of business leaders identify “brand and reputation” as an attribute they value in an acquisition target, making it the number one driver of value in our study.
    • Business leaders said valuations will continue to be boosted by offering increased market share (74%), intellectual property (73%) and strong financial performance (72%).
    • But leaders are also seeking acquisitions that can help them face today’s unique business environment and bridge their talent, tech and trade gaps – the new M&A triarchy: 72% are looking for specialist skilled talent, 70% value supply chain integration and 69% are placing importance on potential targets’ new technologies.

     

    Part three: Strong M&A headwinds in 2022

    Despite high levels of economic confidence and an enthusiasm for dealmaking, the landscape is also fraught with challenges. Barriers to M&A deals over the next 12 months include rising inflation, protectionist trade policies and the war in Ukraine.

     

    • Two-thirds (66%) of business leaders believe the rise of protectionism is creating an unstable environment for M&A – rising to 70% in the energy sector.
      • 67% of business leaders in the supplementary study said the war in Ukraine has reduced their organization’s investment in M&A activity.
      • Business leaders in the supplementary study said that this impact was due to the fall in global economic confidence, increasing commodity prices, share price volatility reducing available capital, and the direct and indirect impacts of sanctions.

     

    Download the report here: https://www.eversheds-sutherland.com/global/en/what/publications/m-a-report/index.page

     

     

     

     

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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