BOSTON—December 14, 2021—2021 saw the highest total deal value on record, reaching more than $5 trillion. Amid this exuberance, strategic M&A—including both corporate and add-on deals—is on track to reach its highest value in six years. However, the M&A market continues to grow increasingly complex. Deals from financial investors, SPACs and VCs grew at 2-5 times the rate of strategic M&A.

These are among the findings of Bain & Company’s forthcoming M&A Report 2022. Bain’s research shows that almost all industries are showing signs of recovery from 2020, with value up and multiples rising. Strategic M&A multiples are at an all-time high, with a median multiple of 16x EV/EBITDA. This requires corporate buyers to have a solid grasp on the M&A fundamentals, while also finding additional sources of value.

Bain & Company surveyed around 300 M&A executives about the critical focus areas for buyers looking into 2022, with talent retention and ESG sticking out as two top priorities.

Talent: the critical component to today’s deals

Amid the ongoing war for talent, dealmakers are hyper aware of the importance of good talent management during the transition period that follows a deal. Bain’s research shows M&A executives cite talent retention as a leading driver of deal success in today’s market, yet they note retention is becoming more challenging than ever.

The executives Bain surveyed see two critical factors to retaining talent: 1) establishing a strong and compelling vision for the future of the combined company, and 2) defining clear roles for employees in the new organization. Bain’s research shows that too often companies focus only on financial retention packages without addressing these broader considerations at play.

ESG: the next big thing in M&A

Surprisingly, corporate acquirers have yet to put a significant emphasis on ESG, ranking it lowest on their list of diligence priorities today. However, most M&A executives expect this to change in the coming future. Winning dealmakers will evolve their diligence and integration playbooks, linking their broader corporate strategy to ESG for a given deal and leveraging ESG as a component of the asset’s value creation plan.   

An optimistic outlook for 2022

Looking ahead, Bain & Company is optimistic that the fundamentals of dealmaking will continue to attract buyers in the year ahead, and most buyers expect deal activity to stay the same or increase in the coming year. However, M&A executives should continue to monitor the impacts of a tightening fiscal policy and regulatory landscape, macroeconomic factors such as supply chain disruptions, and competition from financial investors with access to significant dry powder.

Editor's Note: To arrange an interview, contact Katie Ware at katie.ware@bain.com or +1 646 562-8107.

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