Global M&A Trends: Ciesco & Bird & Bird’s 2021 Global M&A Review and 2022 Outlook

2021 was a record-breaking year for technology, digital, media and marketing sectors by the number of deals, seeing a 60.1% increase from the levels seen in 2020 and a 29.9% increase from 2019.

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We highlight some of the main takeaway points from Ciesco’s and Bird & Bird’s ‘2021 Global M&A Review and 2022 Outlook’ report (the “Report“), summarising the most active entities and trends of 2021 and potential themes investors should look out for in 2022.

The Active Groups

The top 10 most active buyers are dominated by private equity firms and media companies, although they only account for 81 out of 1,747 deals in 2021.

Private Equity (“PE“)

In the low interest rate environment and strong economic recovery following Covid-19, PE funds seized their opportunity and accounted for 45% of transactions by number in 2021. This represents an 8% increase from 2020 and is significantly higher than 5 years ago when the number was below 15%. Although figures are not available for all transactions, it is estimated that the value of these PE deals is $31.8b, which is 90% higher than last year but still significantly below 2019 levels.

PE deals picked up in the second half of the year, with an expectation that this acceleration in both deal size and number will continue into 2022. This is supported by a structural shift in global markets; assets managed by PE firms increased from $2t in 2010 to $7t in 2020. It is estimated that this figure will grow even further, to $13t in 2025.

The ‘Big’ 6

This group of companies includes household names such as Dentsu, WPP, Omnicrom, and Havas. The quick recovery of the global economy was not reflected in deal volume by the Big 6, with the same number of deals occurring in 2021 as in 2020 (15). It is noted that these numbers should be seen in the context of a decline in M&A activity among the Big 6 – a 58% decline in deal numbers since 2016 – which reflects an ongoing strategy of not relying on acquisitions to fuel growth.

Furthermore, the Big 6 made several disposals of existing group companies this year. For example, WPP sold its majority stake in Kantar to reduce debt, while Omnicrom sold Icon International as part of its continued realignment with its strategic plan and investment priorities.

Technology Companies

Large technology companies continue to be the driver in this subgroup, with a continued strong focus on digital media, video gaming, cloud-based solutions, and online marketplaces. Twitter purchased five companies in 2021 (in addition to the seven that it purchased in 2020). Amazon made two acquisitions, including the purchase of MGM Studios for $8.45b – the second-largest acquisition in Amazon’s history, which highlights its desire to remain competitive in the streaming market. Cybersecurity company Okta strengthened its position in the identity authentication market with its purchase of Auth0. Outside of M&A, Snowflake became the largest software company to IPO in history reaching a market cap of $86b on its first day of trading.

Geographic Overview

USA-based targets accounted for 44% of the number of transactions and 84% of their value. 81% of these transactions also involved a domestic bidder. This equates to similar levels as in 2020. The largest deal was all American, being the $43b sale of WarnerMedia to Discovery by AT&T.

Activity in the UK increased by 61% representing a total of 13% of deals completed in 2021; quick economic recovery from Covid-19 and a weakening pound made UK companies more attractive to overseas buyers. This can be contrasted with an 11.5% decline in deal numbers between 2019 and 2020.

The rest of the world has seen a similar boom in activity with an increase in the number of deals from 2020 by 72% in Western Europe, 64% in APAC, 72% in Canada, 67% in LatAm and 20% in the Middle East.

Sector Growth

All sectors tracked by the Report grew in 2021. Digital Media, MarTech and Digital Agency showed the highest deal volume in 2021. MarTech saw an increase of activity by 90% while Digital Agency acquisitions soared by 111%. It is thought that the MarTech sector will reach a size of $344.8b by the end of 2021 with marketing budgets estimated at 23%. There are over 8,000 MarTech companies active, meaning this sector could be ripe for M&A in 2022 and beyond.

The more traditional Agency Services and Traditional Media sectors accounted for 15% and 17% of the number of deals recorded respectively, while Content Production experienced a 177% increase in deal volume from 2020. The Data & Analytics sector saw a 75% surge from 2020 levels.

What to Expect in 2022

With many companies forced to evaluate their businesses over the course of Covid-19, we have witnessed a structural change in the way in which businesses interact with their customers. Digitisation, data and technology has been at the heart of this and will play a role in M&A throughout 2022.

The volume of PE deals may continue to increase and could surpass their 2021 record levels. Competition among PE firms for quality acquisitions is driving competitive bids and higher valuations and it is expected that PE will focus on targets in the digital media and technology with healthcare opportunities. Inflation and rising interest rates could, however, undermine this activity.

Social Commerce will increase over the course of 2022, with many social media platforms emulating Amazon’s ‘one click, next day delivery’. This market is worth an estimated $351.65b in China alone. TikTok and Instagram are currently leading the way, while Twitter is now entering the space. Companies will attempt to utilise Influencers to build their brands and drive sales, so Influencer marketing agencies could see a rise in M&A activity.

Conclusion

The strong economic recovery in the wake of Covid-19 created many opportunities for M&A in 2021, meaning that the results from 2020 can be considered an outlier in terms of deal activity. The trend and appetite for businesses in technology, digital, media and marketing sectors has grown by 48.7% over the last five years and shows no sign of slowing over 2022.

You can read our 2021 Outlook here.

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