Globally, M&A activity continued its modest decline during Q2 2022 but remained historically strong with an estimated 6,429 M&A transactions completed, representing over $838.2B of enterprise value.
- In North America, 4,571 transactions were completed with a combined enterprise value of $547.7 billion.
- The Business Products Services, Consumer Products Services, and Technology industries led the way in global M&A activity in the second quarter, with over 4,933 transactions completed collectively.
- Dry powder remains at high levels with upwards of 1.5 trillion yet to be deployed, with active acquirers continuing to chase after quality assets.
- 16 mega deals ($5 billion+) closed during Q2 representing $207.3B of aggregate deal value.
- Sponsor backed M&A represented 35.8% of global M&A transactions in the quarter, up slightly from the previous quarter.
Despite major headwinds from a mix of geopolitical tensions, inflation and continued supply chain issues, M&A continues apace as strategic and financial buyers seek to take advantage of market volatility to find attractive growth prospects.
Select HCM Insights: Overview & Outlook
- M&A activity has been strong within the HCM industry, with over 70 staffing and workforce solutions deals taking place during Q2 in the United States Founders expects activity to remain strong with elevated activity in IT and professional staffing sectors.
- Nursing shortages continue to be an issue, helping fuel demand for healthcare staffing M&A, specifically within the nursing sector Notable Q2 transactions include Oak Healthcare Staffing’s acquisition of Cunningham Elite Staffing and 424 Capital’s acquisition of Becker Health.
- Global BPO, a $250 billion market in 2021 is projected to grow at a 9%+ CAGR between 2022-2030. Driving growth factors for customer utilization include improved efficiencies, decreasing operating costs, business agility, and focusing on core competencies to improve competitiveness.
- NAPEO reports that 173,000 SMB clients covered by the PEO industry account for 15.3% of all firms with 10 to 99 employees. This sector serves nearly 4 million worksite employees and maintains its promising long term
- In a recent Gartner survey, 64% of workers said they would only consider a new position or job if it allowed flexible hours. They cited having flexible work hours as the main reason for their increased productivity.
- As the staffing industry evolves, digitalization platforms continue their momentum of transforming specific staffing sectors’ business models of matching talent with employment needs. Thinking ahead to the next tech savvy workforce generation, the upcoming Gen Z’ers will demand access to digital platforms providing self serve work choices.
- International Data Corporation (IDC) analysts said by next year, 60 of G2000 businesses will deploy AI- and ML-enabled platforms to support the entire employee life cycle experience from onboarding through retirement.
- The US IT staffing market, consistently the most active in M&A transactions, is expected to eclipse $43.6 Billion by 2027.
- Federal contract spending ballooned from $36 billion in 2017 to a record high of approximately $51B in 2021 a stunning 41% growth over five years. Part of this spending is being directed to strengthening cyber defenses, fortifying IT infrastructure, and protecting critical data in a direct effort to implement emerging technology and modernize outdated systems.
Q2 2022 M&A Trends
- After a monumental year for M&A in 2021 activity has ticked down to a more sustainable pace, partly due to economic and geopolitical uncertainty.
- The historical picture shows an active market filled with acquirers focused on getting the right deals done to drive value and growth.
- Executives maintain a strong appetite for acquisitions as they look to withstand competitive pressures through digital transformation, supply chain efficiencies, and technological advancements. Additionally, executives will look to position themselves for a changing environment through M&A. Strategic and sponsor backed strategics made up ~90% of buyers in Q2, 2022.
- Private equity continues to have high levels of dry powder and will not wait for market lows to look for solid deals. Instead, they will continue to unlock value through carefully considered investment strategies.
- No business is immune to current economic challenges. However, there is considerable evidence that strong companies are continuing to command strong interest from private equity groups and average businesses are trading at lower valuations.