Strong M&A to be further spurred by record cash pipeline: Aon

Global merger and acquisition (M&A) activity won’t match the record levels of 2021 this year, though dealmakers maintain a healthy pipeline with cash at unprecedented levels and will seek transaction opportunities in digital transformation, Aon says.

Annual deal value surpassed $US5 trillion ($7.2 trillion) for the first time last year, reaching $US5.7 trillion ($8.2 trillion), with nearly 26,000 transactions announced worldwide.

The latest M&A Risk in Review report from Aon and Mergermarket says the outlook remains strong for M&A in sectors such as technology, media and telecom (TMT), as well as the Asia Pacific region.

More than half of respondents said the Asia Pacific was the single most attractive region for M&A over the next 12 months.

“Many organisations are well positioned to capitalise on record piles of dry powder,” the report says, adding that cybersecurity investments are particularly sought after.

The survey of 50 senior executives found 70% of respondents believe TMT was the most prolific sector in terms of expected dealmaking over the next 12 months, while energy, mining and utilities was expected to be least active.

Serious headwinds are presented by geopolitical uncertainty, inflation, interest rate increases, the acceleration of the digital economy, cyber threats, and a challenging talent market, Aon says.

Changes in taxation and heightened scrutiny of environmental, social and governance programs are additional challenges.

The global M&A Risk in Review report says dealmakers are seeking transaction insurance to help navigate this higher uncertainty, and Aon global co-CEO of M&A and Transaction Solutions Gary Blitz says it is critical dealmakers examine how M&A insurance solutions can “take certain contingencies off the table for buyers and sellers”.

Dealmakers in Australia and certain sectors clearly saw significant scope for reducing uncertainty through the use of insurance, the report says.

Aon found the most active sectors for use of representations & warranties insurance (also known as warranty & indemnity) were infrastructure and real estate. This cover also supports deals in technology – featuring in 38% of deals in Australia & New Zealand—and in healthcare deals in Australia too.

The report is available here.