Mergers and acquisitions are expected to rise in 2022: Survey

Datasite Chief Revenue Office Todd Albright joins the Yahoo Finance Live panel to discuss the outlook for M&A deals in 2022.

Video Transcript

EMILY MCCORMICK: It's been a record year for dealmaking in 2021. Through the first three quarters of the year, global mergers and acquisition activity reached an all-time high, with more than 27,000 deals completed for a total combined value of $3.4 trillion. We're welcoming in Datasite's chief revenue officer, Todd Albright, now for more. Todd, thank you so much for joining us this afternoon. Looking back at the incredible volume of deal making this year, what do you think were the biggest factors in the market environment that really contributed to this?

TODD ALBRIGHT: Well, it's very nice to be with you, Emily, and on the show today. I have to say, we've been in a bull market for M&A since June of 2020. If you look at the deals that have been happening on our platform we're up year to date 34% year on year. And again, it's all the more astonishing as we lap COVID. Keep in mind the deals that we're seeing on our platform are at inception, not at announced deals. So we get visibility on the market six to nine months of when they actually happen.

But again, you're looking at a low interest rate environment. And particularly, in this age of COVID, you're looking at company's future proofing their business through very aggressive moves, particularly in technology where deal volumes, according to our data, were up 44% year on year, and then particular combinations that would increase competitiveness in the future.

JARED BLIKRE: Well, let's talk about that low interest rate environment. And also the fact that the Fed is tapering, a lot of this is liquidity driven. So we might have slightly higher interest rates next year. But I'm noting in your survey of 600 deal makers that 48% of them expect that the M&A blitz will continue to increase, and we'll have another record year in 2022. Just your thoughts on this in general.

TODD ALBRIGHT: Well, there is nothing in our data that suggests otherwise. And again, we did survey 600 deal professionals. And again, deal professionals or dealmakers in our parlance are investment bankers, corporate finance professionals, private equity professionals, and all the advisors, legal, tax, and otherwise, that serve the M&A industry.

And the view is with-- though the Fed may be tapering and though we may see an increase in interest rate, that doesn't change the fact that from a historical perspective, there are really low interest rates and ample private capital, particularly in the private equity communities, on the sideline, and then debt financing available as well, so we expect it to continue to rise.

EMILY MCCORMICK: In reference to your survey again, 71% of respondents said that inflation impacted an M&A deal they worked on this year. In what ways specifically did you see inflation impacting the deal-making space?

TODD ALBRIGHT: Well, it really affected deal valuations as the cost of capital kept going down, but the cost of doing business kept going up. And so that impacted it to some degree. A secondary factor just could be on overall business metrics and performance going forward. We'll see how this plays out over the next couple of months. But as you noted earlier in the survey, the majority of the acquisitions we're hearing from our dealmakers going forward are really going to be focused on growth. And that growth will come organically from the companies that they buy, but also revenue synergies where you're bundling the products you have with the products you acquire to try to drive that growth.

JARED BLIKRE: And I was just going to ask you that. So I'm going to ask you a little separate question here. Another fact from your report, 89% of dealmakers were more selective in choosing dates to move forward within 2021 this year due to bandwidth constraints, high valuations, or macroeconomic concerns. It sounds like there could be a lot of pent-up demand just from the deals that couldn't be made this year because everybody was too busy. Your thoughts on this? Is that your conclusion, or is this just, do we have enough space in 2022 to make it a record year, a banner year on its own?

TODD ALBRIGHT: Well, it's a very astute point, Jared. I mean, what we saw is if you look at sort of earlier, you know, in the fourth quarter, we saw a bit of a slowdown as people were trying to conclude deals. But what we've seen in the last six to eight weeks is that move up and to the right again, deals on our platform up 34%. That's not stopping in the fourth quarter. And we agree with you that one of the things that has, frankly, slowed-- again, we're on a torrid pace of M&A, but if there's anything slowing it down, it's probably the human intensive work that goes into completing a due diligence process.

And so what we see a lot of forward leading firms doing-- these are M&A advisories, again, corporate finance professionals-- is they're really looking to technology. And that's where we fit. Again, we're a utility, workflow content management, all very secure, that helps dealmakers complete deals more quickly. We're investing in AI technologies that basically automate and streamline the process of preparing, serving up diligence materials, and then interrogating and performing due diligence on an automated basis. And so what I think you're going to see is relief in that human intensive work through the application of technology. That's kind of where Datasite fits in the process.

EMILY MCCORMICK: What's your outlook next year for SPAC mergers? Because of course, we had a really strong start to 2021 in terms of that kind of deal-making. It petered out a little bit in the middle and back half of this year. So where do you think we're headed on that front in 2022?

TODD ALBRIGHT: Hard for me to predict. But again, our indicators say that the SPAC markets will continue to be strong if only because you've had a record number of launches this year. And these blank check companies have to do deals within the next two years. And so the fact that you've had a number of issuance, that's going to put pressure on the market to do deals. And so we would expect SPACs-- and these SPACs-- to continue.

JARED BLIKRE: And I just want to kind of turn back to your response about the technology that you use. I was doing-- I started doing due diligence in the mid-90s, and I was using a phone, a paper and pen, lots of-- email was kind of just being invented or just being adopted. What are some of the tools, especially in the pandemic era, that people are using in lieu of a lot of the face-to-face meetings that used to happen and aren't happening as frequently as now?

TODD ALBRIGHT: I mean, Jared, whenever you want to get back in the M&A industry, you're welcome to talk with us at Datasite. But I think the biggest thing is a lot of M&A was happening face-to-face prior to the pandemic. And then all of a sudden, we moved to an era of Zoom-enabled meetings. And so you have less travel, you have more meetings going on in Zoom. And that's not just mergers and acquisitions, it's IPO road shows, it's financings, it's capital raisings. Now all of these things are happening much more efficiently.

I was talking with an investor the other day. He's about to raise a new multibillion dollar fund. And I said, are you hitting the road? And they actually built a studio within their offices to basically do all of their fundraising virtually. And so that transformation to doing this work virtually-- and obviously, I can't help but-- help myself but a lot of the investments that companies like Datasite are making, particularly with respect to artificial intelligence and allowing, you know, the rich history of M&A, allowing that to inform automated completion of work and tests, as opposed to what previously have been done manually by more junior professionals in this industry, that, too, is accelerating matters.

EMILY MCCORMICK: All right, we'll leave it there for now. Todd Albright, Datasite chief revenue officer, thank you so much for your time.