COVID-19 brought about a wave of companies re-thinking their business strategies and revising their operations to best meet the need of their stakeholders. It gave way for businesses who once excelled in the market with their traditional methods of operations to now think agile and incorporate new technology to remain competitive. Businesses were forced to further restructure a majority of their operations and incorporate new changes in the globe market. This trend has not changed at all as the year 2022, going into this year, brought about more issues that businesses have to navigate. There exist new technological advancements, more regulations, changes in the social media landscape, employment issues, geopolitical issues, supply chain issues, rising interest rates, inflation and potential recessions which all affect M&A possibilities.

With that been said, companies who will seek M&A ventures this year may have a slightly different approach and rationale than what they had in previous years. It's hard to predict what the market will be like, but companies will seek M&A deals if it truly makes sense and the benefits undoubtedly out weight all costs. With this, I have highlighted 3 key M&A trends that we should expect to see as companies adjust to the current and future state of their respective industries.

1. Increase in Supply Chain-related transactions

The pandemic has shifted what was once the complex and coordinated nature of the global supply chain network that we have become reliant on. It exposed how global economies rely heavily on the timely production, transportation, distribution and storage of raw materials and final goods. Delays in transportation and the current labor shortage along the supply chain have made firms more interested in acquiring logistics companies that could alleviate future unforeseen circumstances in specific areas of their supply chain. eg. Businesses may acquire a warehouse company to supplement increases in production and to expand their storage footprint to locations from which their goods can be transported to clients is less time and possibly at a lower cost.

While outsourcing is the norm, current instability in some countries and regions provide a compelling reason for businesses to pursue M&A opportunities locally or offshore in areas that poses fewer risks to their supply chain. In addition to this, it would be no surprise to see investments in supply chain technology and the acquisition of businesses with the technology to make a supply chain system more efficient and robust. It's even more crucial this year and onwards for executives to stay on top of all levels and processes of their supply chain network to maintain not just a competitive advantage, but to minimize the risk of future global disruptions.

2. Increase in Big Pharma and Healthcare Transactions

Large pharmaceutical companies and conglomerates saw record increases in revenue and profit over the last 3 years, having been tasked by government agencies across the world to develop vaccines and boosters for COVID-19. Having over $1.7T in cash flow now provides them with plenty of leverage to make various acquisitions in the market. Biotechnology and healthcare supply chain are two major areas that we may see the most M&A activity. Four (4) life science companies have announced transactions totalling $4b so far this year, compared to the very few companies like Pfizer and Amgen who secured $40b of the total $60b in healthcare deal value last year. Cancer research & technologyis still one of the main drivers of healthcare M&A which is expected to continue this year.

The COVID-19 era has indirectly improved the relationship between governments and pharmaceutical companies in terms of securing funds to further address any global health crisis. It would not come as a surprise to see acquisitions relating to research companies, vaccines, therapeutics and specialty medicines that can address future global health crisis.

3. More Smaller Deals, Less Large Deals

With the increase in regulatory pressure and scrutiny, it is a much safer option for businesses in certain sectors to pursue smaller deals this year. Global antitrust efforts have increased and governments have been taking a closer look at how major deals affect the competition in the industry. In January of last year, Microsoft announced a deal of $68.7b to acquire Activation Blizzard, a video game company. They were later sued by the U.S. Federal Trade Commission (FTC) in December amid concerns about competition; sentiments also expressed by rivals Sony, Google and Nvidia. The European Commission is expected to object to this deal later this month amid antitrust concerns as well.

With newly enforced regulations, increase deal timeline due to additional reviews, and increase legal fees associated with litigation that might come about with big deals especially in tech and healthcare sector, it might be more beneficial for businesses to pursue much smaller deals this year.