ISSUE 1 | 2022
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to provide a runway for funds to continue seeking platform and add-on opportunities, while also dealing with increasing competition and valuations. 2021 also marked the year of a rise in Environmental, Social and Governance (ESG) considerations for many investors and funds. Strengthened by the pandemic and regulatory changes, ESG has made an impact on investing decisions, due diligence and ultimately deal activity, regardless of the size of the deal. While its impact to M&A is less direct, it has certainly made a contribution to the way deals have been sourced, evaluated and executed in recent quarters and it will be prevalent moving forward. KEY SECTORS In 2021, M&A activity increased across eight of the nine tracked sectors compared to 2020, with the exception of Real Estate, which had only 16 deals tracked in 2021. Financial Services experienced the biggest rise, with 236 deals in 2021, increasing from 117 in 2020. Next were TMT and Industrial & Chemicals, which increased 80% and 48% respectively with 993 and 399 deals. The remaining sectors all increased by at least 10% in terms of year-over-year volume.
Another enduring factor contributing to increased activity in 2021 is accelerated retirement plans for business owners. While the aging demographics of the population have been well known to be a positive contributor to divestiture activity, a recent survey of 150 North American business owners found that 66% planned to sell or retire sooner due to the COVID- 19 pandemic. The reasons for this are diverse, including the monetization of recent successful years, a fear of new increased taxes on capital gains (both in Canada and the USA) and a lack of desire to take the necessary steps for the next phase of growth or maintenance after an exhausting past couple of years. Regardless of the reason, this accelerated transition has been one of the biggest factors driving mid-market M&A in 2021 and this will continue to be the case. Private equity maintained its status as a large factor in M&A activity, contributing 36% and 35% of total deal value and volume in 2021 respectively. North American dry powder estimates are in the trillions and 2021 was another successful year in fundraising, which should continue
after withstanding a year with significant challenges. The resilience of mid-market business owners and management teams are another contributing factor that should not be overlooked. In another year marred by supply chain issues, lockdowns and varying other headwinds outside the capital markets, businesses have endured and shareholders have found opportunities across all industries to acquire or divest. From chip shortages to multi-year high shipping rates, global supply chain issues had some influence on virtually every industry throughout 2021 and have driven many strategic buyers to employ vertically integrated focused M&A strategies to try to increase some control over their purchasing and/or material procurement. Regionally, several areas experienced additional disruptions due to natural disasters such as the wildfires and floods in parts of the US andWestern Canada presenting additional challenges for companies trying to move goods across country or for businesses with coast-to-coast operations. However they arose, industry participants were able to navigate varying, more localized issues and continue to get deals done.
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