Following 2021 with impressive numbers in the merger and acquisition (M&A) market, M&A activities are expected to continue to grow in 2022, despite market fluctuations.

The latest PwC report addressed the main reasons behind this optimism, including strong transaction, flows, available abundant capital, and high demand for digital assets and data.

Trading volume and value in 2019-2021. Source: PwC

In the past year, the total number of announced deals globally exceeded 62,000, up 24% compared to 2020. The announced deal value reached US$5,100 billion, including 130 large-scale transactions (megadeals) worth more than US$5 billion, 57% higher than in 2020 and surpassing the record of US$4,200 billion in 2007.Accordingly, in 2021, the total volume and value of deals reached a record level.

The Asia-Pacific region recorded a 17% increase in total transaction volume over the same period last year.

Private Equity Funds continue to record high transaction frequency and value. Nearly 40% of transactions in 2021 involve these funds, up sharply from just more than 25% five years ago.

In 2022, private equity funds have been increasing their trading capacity. The total capital of global private funds reached US$2.3 trillion by the end of 2021, 14% higher than at the beginning of the year, providing a great impetus for M&A activities in 2022.

However, according to PwC, the challenge for these funds is finding a way to get value in the face of rising interest rate and multiplier pressures, along with pressures related to ESG (Environmental, Social, and Governance).

On the corporate side, PwC’s report expected that the strategic shift to digital, innovative and disruptive business models would continue to drive M&A decision-making. In a global market that requires a value-creation mindset, CEOs are likely to focus on divestments to balance portfolios, ensuring long-term growth and profitability.

ESG will also increasingly influence M&A strategy in 2022 as investors use these criteria to assess risks and identify value creation opportunities.

As economic optimism remains high, PwC’s report showed that the global M&A market was expected to grow strongly in 2022, with transaction volume and value continuing to reflect a vibrant market with abundant capital.

However, the pandemic has caused many disruptions to the global economy and, at the same time, has resulted in many structural and financial barriers to transactions in 2022, including high-interest rates, rising inflation, increased taxes, and tighter regulations.

Even so, business leaders seem undaunted by these macroeconomic fluctuations. According to results from the 25th annual PwC Global CEO Survey, 77% of CEOs expected global economic growth to improve in the coming year. Furthermore, more than 50% of CEOs expressed high optimism for revenue growth in their businesses over the next 12 months; led by CEOs of private investment funds (67%) and technology companies (64%), which were the two sectors with the highest volume and value of M&A transactions in 2021.

Talking about future prospects, Ong Tiong Hooi, Leader of Transaction Advisory Service, ESG Leader of Trade Advisory Service, PwC Vietnam said that global business transactions in general and in Vietnam, in particular, were expected to continue to flourish in 2022. To maintain a competitive edge, traders should watch out for hidden factors in trading such as volatility in the financial markets and the macroeconomy.

“The next 6 to 12 months could be an exciting time for M&A transactions in Vietnam thanks to supportive policies and regulations of the Government. The domestic market is expected to continue to maintain good growth momentum, bringing many opportunities for domestic investors, creating many positive prospects for Vietnamese corporations to compete effectively on a larger scale," said Ong Tiong Hooi.