Blog Which industries look set to be at the forefront of the M&A boom in 2022? - Plimsoll Publishing UK

As the world recovers from the last two years, companies are planning for the future. Board rooms across the planet are assessing their business’ standing in the aftermath of COVID-19 and, more importantly, deciding what their next strategic move is.

Making an acquisition and bringing another business into a larger group is growing increasingly popular as a means to reboot growth plans and eliminate the dependencies the pandemic brutally exposed. Why set up a new company or division in a different market when you can more cost-effectively buy an established one?

As a leading provider of analysis and M&A intelligence to business leaders across the globe, Plimsoll has recently completed our annual survey of owners and directors across all sectors of the economy. 33% of respondents told us they intend to make an acquisition in the coming 12 months.

M&A deals are already starting to make headlines as appetite grows. From US chip giant NVIDIA purchasing ARM to ViaSat taking over Inmarsat, deals are increasing across all sectors, are increasingly international and pay little mind to political concern. But it’s not just at the larger, corporate end of the spectrum - deals are being done at all levels. The first half of 2021 has seen a record $2.8 trillion in completed deals.

Plimsoll has provided analysis to tens of thousands of clients, across the spectrum of industries and in more than 100 different countries. Based on our assessment of key markets, the following sectors are seeing the most M&A activity:

Veterinary & Pet Care

During the past two years, the demand for pets has been unprecedented as families, long put off ownership by working patterns, were at home more than ever. As a result, demand for veterinary care and animal health has risen sharply. In Europe alone, the number of households with at least one pet has risen to 88 million.

Brexit has also increased demand as veterinary checks, newly introduced to the UK as a third country, are leading to bottlenecks in the meat and slaughter trade with the EU. With a dearth of European vets available in the UK and legal requirements for vets to be present in abattoirs, the Food Standard Agency COO recently said, “There could be a small number of short service interruptions within the weeks prior to Christmas”.

As a result of the explosion in animal care demand, external investors continue to pile into the market looking for high margin, well-established companies that have thrived during the pandemic. While private equity made up 51% of deals, peer to peer acquisitions is also increasing.

In the UK alone, more than 3% of the animal and pet care sector has changed ownership over the past 2 years, with 63 deals having been completed. Here are the 5 veterinary industries we expect to see the most M&A activity between companies as strong companies buy up undercapitalized rivals:

Tending to domestic pets while also keeping up with the demand brought about by shifting political sands, particularly between the UK and Europe, is exerting pressure in the veterinary and animal health sector. The efficiency gains of consolidation and pooling of expertise could see an acquisition boom in 2022, further fueled by the external attractiveness of the sector.

Information Technology

From growing cyber security threats to 5G, growing adaptation of robotic / AI to the “Internet of Things”, demand for IT expertise is becoming a strategic as well as an economic issue.

In fact, the tech sector accounted for a third of deals in what has been an unprecedented global boom in M&A deals. NVIDIA’s acquisition of chipmaker ARM and Microsoft’s purchase of voice-to-text Nuance Communications show the appetite for consolidation across the sector as companies diversify into different niches and markets.

With such rapid evolution in the technology sector, many companies are replacing much of their R&D spending with M&A spending. Over recent decades it has proven much easier to allow “unicorn” companies to develop and patent new technology and acquire them on the point of maturity than develop the technology in house.

In the UK, 216 deals have been negotiated and completed in the past two years. As we move into 2022, here are the 5 areas of the IT sector we expect to see the most M&A activity as strong companies buy up undercapitalized rivals:

The IT sector is at the forefront of the fourth industrial revolution currently underway and, as a result, there is likely to continue to be a steady stream of deals as the sector consolidates.

Financial Services

At no time since the crisis of 2008 has the financial services sector faced such an uncertain period. Interest rate rises and quantitative easing is being pared back as central banks look set to wean an overheating economy off cheap money in the face of soaring inflation. It is still uncertain the level to which “non-performing loans” will become a major issue as money gets more expensive but most analysts are predicting a boom of distressed M&A deals in 2022.  

Elsewhere the continued digitization of the financial sector continues apace. Tech giants such as Apple and Google are increasingly present in the FinTech sector and driving M&A and cultural change. Deals between established finance companies and digital disruptors seem likely.

Finally, the uncertainty of Brexit continues to throw doubt onto all aspects of the financial services market. Euronext’s recent acquisition of Bourse Italiana from LSE Plc shows an increasing appetite for euro clearing and other currency trading to be done on the continent now the UK has left the EU.

In the UK financial sector, 161 deals have been completed in the past year as industries consolidate, adjust to an increasingly complex geopolitical landscape and the market of technological innovation. The following are the 5 industries within the sector Plimsoll feels could see a spike in deals in 2022 due to the sheer number of companies showing signs of distress:

The financial sector has long been a political jewel particularly in the UK where it accounts for almost 7% of GDP. However, with tectonic shifts, both political and economic, underway across the world, the sector looks set for a significant round of acquisitions in 2022.

The recent spike in acquisition activity could visit almost all parts of the economy in 2022. Whether it is companies looking to diversify into new markets to nullify the dependencies COVID-19 exposed, buying in expertise and products without the R&D risks or securing supply chains, the reasons for making an acquisition are aplenty.

Since 1987, Plimsoll has been helping companies instantly identify the companies that meet their acquisition criteria. From global, cross-industry searches to concise criteria covering niche, domestic markets, we take the stress out of searching for the best opportunities.

Reduce your own acquisition search from months to minutes with Plimsoll today. Contact us on +44 (0) 1642 626400 to discuss your criteria and get a FREE count of how many companies there are that meet it or click here to submit your criteria for free.