The publication brings together thinking from a number of KWM lawyers working in each field and outlines five focus areas for the M&A market: tech and data, ESG, governance, climate and energy transition, health, super funds and private capital and government, ahead of the federal election this year.

On the tech and data front, partners Anthony Boogert and Kate Creighton-Selvay flag four key factors – valuations, tech companies’ acquisition attractiveness as “bolt on” growth, election year regulatory attention, and the focus on national security – as defining both the market and deal structures.

“COVID-fuelled changes to consumer and business norms will continue to create new markets and opportunities for innovative companies,” they predicted in the report.

“Entrepreneurs bringing new tech solutions to market will continue to enjoy attractive exit options given the pressure on legacy businesses to deliver growth and the ‘dry powder’ sitting with private equity.”

In terms of ESG concerns, partners Edwina Kwan and Vishal Ahuja expect increased demand for ESG due diligence, with more questions being asked of directors and boards than ever before in relation to climate issues. According to the report, major energy market reforms will also drive deal-making to underpin the transition to net zero.

“As interest groups, shareholders and communities around the world bring more (and novel) climate change actions to court, the key decision-makers (governments and corporations) are going to be challenged in ways that will continue to impact everything from M&A strategies and diligence, to disclosures and decarbonisation plans,” the report stated.

“Organisations will need to demonstrate they have reasonable grounds to support any representations contained in those disclosures, at the time which those disclosures were made.”

VIEW ALL

According to partners Will Heath and Sarah Yu, superfunds and private capital investors will seek to deploy capital beyond traditional infrastructure and project sectors – and look for opportunities in adjacent sectors like service and technology businesses and real estate, broadening their impact investing, and taking an increasingly sophisticated venture-style approach to fast-growing fields like fintech.

“Expect super funds and private capital to remain in the box seat for acquisitions. These funds’ cash reserves provide flexibility should credit markets tighten or become more expensive in the face of inflation pressures, and their generally positive reputation means they face lower regulatory and geopolitical risk doing deals,” the pair wrote.

Similarly, partners Nicola Charlston and Jason Watts reported private capital active in the health sector too, whereby funds will look to back businesses able to treat lifestyle diseases and compete with existing players like insurers to address consumer demand for more digital and personalised care delivery.

In the government sector, Annabel Griffin and Mark Upfold predicted that 2022 would “be an eventful year”. The election will motivate political leaders to seek ways to drive growth without additional borrowing – meaning opportunity for innovative proposals and partnerships with private enterprises.

“Regardless of what the virus may have in store, political leaders will seek to offer a ‘post pandemic’ vision. The challenge for those steering (or seeking to steer) the nation will be fiscal – how to encourage recovery and govern responsibly at the same time, especially in the face of global inflationary pressure,” the report stated.

The release of the KWM report follows a number of predictions that the M&A boom will continue into 2022, as seen in reports from Herbert Smith Freehills and Corrs Chambers Westgarth.

The release of HSF’s fifth annual global M&A report, M&A in 2022: FOMO overcomes FOGO, identifies continued drivers for strong activity in 2022. According to the report, initial pandemic-related FOGO (fear of going out) has largely been replaced with FOMO (fear of missing out) on the new opportunities that it is presenting.

Meanwhile, Corrs Chambers Westgarth’s M&A 2022 Outlook report, released late last year, predicted a similar trend; despite ongoing COVID-19 disruptions, investor optimism coupled with low-interest rates and significant amounts of deployable capital will mean deal activity will remain elevated for the majority of 2022.