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More CEOs eyeing M&A deals this year, after record-breaking US$5T in 2021

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More CEOs are eyeing M&A deals in 2022, according to a survey of over 2,000 corporate leaders by
More CEOs are eyeing M&A deals in 2022, according to a survey of over 2,000 corporate leaders by "big four” accounting firm EY (Photo by Spencer Platt/Getty Images)

2022 could be another banner year for corporate dealmaking as more CEOs look to mergers and acquisitions to fuel growth, according to a survey by accounting giant EY. Their expectations for more tie-ups come on the heels of a record-setting year in 2021 that saw the value of M&A transactions top US$5 trillion for the first time.

The "big four" accounting firm surveyed more than 2,000 CEOs in 53 countries in November and December of last year. The respondents span 14 sectors ranging from financial services, to construction, to telecommunications. The results show 59 per cent plan to pursue transactions in the next 12 months, up from 49 per cent at the start of 2021.

"Coming off a record-breaking run for M&A, many CEOs will be focusing on integrating assets acquired over the past 12 months, but CEO acquisitive intentions should ensure continued deal activity at high levels in 2022," Andrea Guerzoni, EY global vice-chair of strategy and transactions, said in a news release accompanying the survey.

The U.S., the UK, China, India and Germany are the top-ranking jurisdictions for CEOs planning deal-driven growth. The respondents say tech, healthcare, and advanced manufacturing are the top sectors where they plan to go shopping for new assets this year.

"At the same time, the impact of the fragile global environment and the increasing cost of doing business across the board, from rising inflation to rocketing energy costs, are keeping them up at night," Guerzoni added.

EY found inflation is the most immediate, and increasingly international, issue of concern. A majority of those surveyed (87 per cent) cited rising input costs as a potential headwind for new deals. Eighteen per cent say they are worried about global trade tensions. The impact of climate change was identified by 17 per cent of respondents.

"In the past two years, pandemic-related shutdowns have wreaked havoc on global supply chains. Labour and energy costs have risen, as have the costs of raw materials. Freight rates have jumped more than 400 per cent from their 2019 levels," Guerzoni wrote in the report. "Add mounting warehousing costs, and sales lost due to delays, and it all adds up to an increased cost of doing business."

According to data from Dealogic, global M&A volumes topped US$5 trillion for the first time in 2021, eclipsing the previous record of US$4.55 trillion in 2007. Data from Refinitiv pegged the overall value of those deals at US$5.8 trillion, up 64 per cent from the previous year.

AT&T's (T) US$43 billion deal to merge its media businesses with Discovery (DISCA) was the largest deal of 2021.

However, Canada was not far behind on high-value transactions. Canadian Pacific Railway (CP.TO)(CP) completed its US$31 billion takeover of Kansas City Southern in mid-December. Rogers Communications' (RCI-B.TO)(RCI) proposed $26 billion takeover bid for Shaw Communications (SJR-B.TO)(SJR) is set to boost Canada's contribution to global dealmaking in 2022, if the transaction is completed.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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