Record M&A activity predicted to continue Record M&A activity predicted to continue Record M&A activity predicted to continue

• 58% of M&A leaders expect higher deal volumes in 2022, following a record year in 2021
• 73% expect deal multiples to increase in 2022
• 75% say 2022 will be a sellers’ market as buyer competition intensifies
• Skills gaps called out as the main threat to deal activity - followed by rising inflation and political change
• Only 1 in 10 consider Brexit as a threat to dealmaking in 2022
• Financial as opposed to strategic buyers expected to lead the charge in deal activity
• ESG agenda continues to be of significance to M&A strategy

Record levels of merger and acquisition (M&A) activity are predicted to continue in Ireland in 2022 according to KPMG’s annual M&A Outlook survey, published today. The survey of over one hundred of Ireland’s leading M&A executives and advisors found that a majority (58%) expect 2022 deal volumes to increase above 2021 levels, and a further 41% expect deal levels to remain at buoyant 2021 heights. Just 1% expect a decline in deal volumes this year, signalling strong business confidence despite the ongoing impact of COVID-19.

Three quarters of respondents (75%) anticipate that 2022 will be a sellers’ rather than a buyers’ market, likely to be driven by continued competition for high quality Irish target companies amongst both international and domestic investors.

In a further vote of confidence for M&A activity in Ireland this year, particularly those selling, a significant majority of those surveyed (83%) say they intend to pursue M&A opportunities in 2022 and almost 3 in 4 respondents (73%) expect deal multiples / pricing to increase in 2022.

Ireland’s M&A leaders expect deal activity in Ireland in 2022 to be led by financial rather than strategic buyers, with 57% saying they expect financial buyers, i.e. private equity, to complete the highest volume of transactions in Ireland in 2022, versus 43% for strategic buyers. This is perhaps reflective of the asset classes’ increased prominence following many recent successful private equity transactions and the availability of capital due to significant private equity fundraising activity globally.

When asked what factors could negatively impact dealmaking, respondents cited human capital / skills gaps (39%), concerns regarding inflation (25%), political change (15%) and rising interest rates (11%) to be the primary factors likely to inhibit deal activity in 2022. Interestingly, just 10% considered Brexit to be a factor that could potentially negatively impact deal activity this year.

Aligned with previous years, technology and healthcare are expected to be the most active sectors for M&A activity in 2022, with energy and infrastructure predicted to be the third most active sector. In a change from last year, the retail sector was predicted by just 3% of respondents to be the most active sector in 2022, compared to 12% in last year’s survey. 

The sustainability agenda continues to increase in significance for dealmakers, with 92% of respondents saying they intend to factor sustainability into their 2022 M&A strategies, compared with 86% in 2021 and 67% in 2020 - a 25% increase in just two years. Environmental, Social and Governance (ESG) factors will continue to impact decision-making as operating models become subject to more stringent sustainability requirements under proposals such as the EU’s Corporate Sustainability Reporting Directive (CSRD), which will impact 2023 reporting periods for companies falling under its remit.

Commenting on the survey findings, Mark Collins, Partner and Head of Deal Advisory, KPMG in Ireland, said: “2022 is set to be another very busy year for M&A activity in Ireland, with dealmakers predicting increased deal volumes, and sellers expected to receive more value as competition amongst buyers for high quality Irish companies intensifies. The evolving tension between financial and strategic buyers will be one to watch in 2022, with financial investors being backed by our survey respondents to outplay strategic buyers this year. This isn’t surprising given the major role that private equity has played in what was an extraordinary year for M&A in Ireland in 2021.”

David O’Kelly, Partner, Corporate Finance, KPMG in Ireland, added “It’s extremely encouraging to see the upward trend of recognition for the green agenda in this year’s survey. Businesses that don’t embrace sustainability will get left behind, as regulatory bodies, shareholders and consumers alike will continue to demand corporate behavioural change and transparency in 2022 and beyond. My advice to businesses considering selling in 2022 is to focus on attracting and retaining talent to create and maintain value, as skills gaps have posed serious challenges for several industries during the pandemic. On the funding side, we’re seeing that traditional banks and non-bank lenders both internationally and domestically continue to be supportive of Irish M&A transactions.  My main watch out for 2022 will be further rises in inflation or interest rates, which could increase the cost of financing an acquisition and potentially temper activity levels.” 

If you have any queries on the topics raised in this year's M&A Outlook 2022 report, please get in touch with Mark Collins or David O'Kelly of our Deal Advisory team.