The Deal in Focus:
Heads of M&A survey 2022

After a record volume of deals in 2021, we asked over 100 corporate Heads of M&A in Australia and New Zealand what their predictions are for the next 12 months. And the results speak for themselves.
The fifth edition of the ‘Deal in Focus: Heads of M&A survey’ of corporate heads of M&A – including responses from New Zealand for the first time – acknowledges significant economic and geopolitical challenges. Nevertheless, over 100 survey respondents are upbeat and confident about their M&A prospects: more than 80% predict the number of transactions will increase, or stay stable, over the next 12 months. Since we began our Heads of M&A survey in 2017 we've asked M&A leaders to share their expectations on whether the number of deals their organisation saw or pursued would increase, remain stable or decrease in the following 12 months. Let’s see how their views have changed over time. Read the full report
2017 Stable and optimistic The market for M&A transactions in Australia was positive. Almost all survey respondents indicated that they expected deal activity in 2017 to remain consistent with 2016 levels.
2019 More of the same Deal activity was expected to remain steady, with business confidence levels relatively neutral during the survey period.
2020 A bumper ride responding to the pandemic Australia entered its first recession in nearly 30 years in 2020 and most businesses navigated their response to COVID, adopting defensive M&A strategies.
2021 Reaching new heights Last year, 58% of survey respondents expected deal activity to increase and they were right. It was a record year for M&A.
2022 A new horizon After an extraordinary year, M&A leaders are facing a different outlook. While there are significant headwinds, activity is still forecasted to remain strong. M&A has long been a tool to help companies grow and reach their potential, especially in challenging markets. The year ahead is set to prove that reality once again.
What a difference a year makes.
This fifth instalment in our annual survey of New Zealand and Australian corporate heads of mergers and acquisitions (M&A) paints a completely different picture to last year’s survey.
THEME 1 The M&A future looks bright, but valuation is the biggest challenge
This year’s survey results underline solid market confidence, with a total of 83% of survey respondents expect M&A deals to rise or stay stable. The recent strong run of M&A deals is likely to continue in the next 12 months – economic headwinds or not – as corporates take advantage of adequate cash reserves, strong debt markets and the rise of alternative lenders. Businesses are looking to grow their core or accelerate transformation, but the uncertain economic outlook makes valuation a challenge, which may affect the speed of the transaction process. Read the full report M&A has long been a smart tool to help companies grow and reach their potential, especially in challenging markets. The year ahead is set to prove that reality once again. Confidence remains: 83% of survey respondents expecting M&A deals to rise or stay stable in the next 12 months. The challenge: 80% of respondents believe the valuation of assets will be their greatest challenge in 2022 and 2023.
THEME 2 Delivering on the deal
The competitive deal environment and high valuations over the past two years have increased the focus of corporates moving faster to deliver on deals and their strategic returns. Delivering cost synergies is now par for the course – to succeed in this landscape, M&A leaders must identify integration risks and opportunities earlier and get more technologically and culturally sophisticated in the delivery of deal value. A clearly articulated, well-considered deal thesis, or business case, will be fundamental to success. Read the full report
THEME 3 Accelerating business transformation
Most survey respondents understand that they need to embark on their digital transformation journey – the question is, what does transformation look like for you and how will you do it? Whether it’s to transform the business model, drive the sustainability agenda, or pursue strategic alliances to access new markets, M&A is a proven way to get the job done. To succeed, deals must factor in five key challenges according to this year’s survey respondents: the changing economic cycle (50% see it as a high risk), technology (37%), environmental and climate factors (35%), supply chains (31%) and changing consumer habits (30%). None of these should be considered in isolation. Read the full report People first A total of 74% of M&A leaders selected customer experience as a high priority area of digital transformation.
THEME 4 Why scenario planning has never been more important
Disruption is a fact of life for many businesses as geopolitical risks, supply-chain bottlenecks and labour force changes add to traditional economic challenges. In this year’s survey, 88% of respondents nominated the changing economic cycle as the biggest disruptive force that will affect the drivers of M&A for their business performance in the next 24 months, while 60% identified technology as a troubling force. Against this backdrop, M&A gives businesses a chance to quickly respond to testing environments, but to do so, a comprehensive risk plan will be essential. Read the full report
THEME 5 Spotlight on ESG shows no signs of dimming
Companies are increasingly incorporating ESG factors into M&A deals, with 63% of survey respondents factoring ESG into deal decision making all or most of the time. While the market is still grappling with the relationship between ESG and value, an increasing number of respondents have walked away from a potential transaction because of the target company’s ESG performance. 54% of respondents said they would pay less for targets with negative ESG attributes, with 35% saying they’d pay more if the target had positive ESG attributes. The sooner M&A teams understand how ESG is a game changer to drive value creation, innovation, and competitive differentiation, the better. Read the full report ESG will increasingly be a source of M&A value creation, enabling businesses to position their portfolios and capabilities for long-term sustainable success. ESG lens 63% of survey respondents are factoring ESG into deal decision making all or most of the time
INDUSTRY FOCUS Power, Utilities & Renewables Once in a generation energy transition keeps M&A activity buoyant The imperative for change has never been greater; and neither have the stakes. As energy prices soar and supply risks escalate, the conviction to create a more sustainable framework and solution has extended beyond the board room and into the family room. With 77% of respondents highly confident of their balance sheet strength and 61% highly confident of favourable credit conditions, the Energy, Renewables & Industrials sector is well positioned for another active year for M&A. Read the full report INDUSTRY FOCUS Financial Services Smart banks, insurers counting on M&A pay day Interest rate rises are creating a favourable environment for financial services players such as banks and insurers. So, as they evaluate their core portfolios and fill any talent or product gaps, M&A will be on their radar. As the year unfolds, the focus for financial services businesses should be on identifying quality acquisition targets, expediting the synergy capture from recently completed M&A deals and enhancing customer experience through M&A. Read the full report INDUSTRY FOCUS Consumer Winning the consumers As the sector prepares for more uncertainty in this new volatile market post-COVID-19, businesses can prosper if they get things right on two fronts – first, by offering strong value to prospective buyers and, second, by differentiating their product offering to win over customers. In this environment, M&A should be a powerful instrument in consumer businesses’ differentiation toolbox. Read the full report Mergers & Acquisitions: A New Zealand Perspective Read more on the blog Explore our previous Deal in Focus: Heads of M&A reports Explore our previous reports Report authors
Jamie Irving Partner – Deloitte M&A
In conversations with Australia’s M&A Leaders, we heard that the market expects deals to be done, and this is consistent with what we’re hearing from CFOs and CSOs.We continue to see corporates prioritising their growth and transformation agendas, and though economic conditions may impact asset valuation and slow the transaction process, remain undeterred. Read the full report
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Kat McMaster Partner – Deloitte M&A, Technology
I believe tech-enabled M&A is a gamechanger. It will continue to be a key part of the corporate arsenal, helping businesses to build resilience to withstand the evolving economic and business environment while also accelerating business transformation. Read the full report
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Stephen Smith Partner – Deloitte Access Economics
As economic conditions become less favourable, defensive M&A strategies can help Australian and New Zealand corporates to improve resilience and position for the future. Read the full report
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Marc Hofmann Partner – Deloitte M&A, Power, Utilities & Renewables
We face a once-in-a generation opportunity to change Australia’s energy landscape, which provides an exciting opportunity for consumers and producers alike. We anticipate ongoing strong M&A activity among buyers and sellers. Be prepared to move quickly and decisively. Read the full report
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Victoria Brilliant Partner – Deloitte M&A – Consumer
As the consumer sector prepares for more uncertainty in this new volatile market post-COVID-19, businesses can prosper if they get things right on two fronts – first, by offering strong value to prospective buyers and, second, by differentiating their product offering to win over customers. Read the full report
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Richard Dorset Partner – Corporate Finance
The survey showed that there were many reasons to remain optimistic that corporate M&A activity will remain healthy over the next 12 months, including respondents on both sides of the ditch agreeing that balance sheet capacity, liquidity reserves and access to capital is available for quality M&A targets. Read the full report
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Ian Turner Partner – Deloitte M&A
Even as this report goes to print, we’re observing how market volatility can give the market pause.
But we’re optimistic; the market has strong cash reserves and we continue to see a very healthy deal pipeline and I’m confident we’ll continue to see a resurgence of deals as the market stabilises and confidence returns.
Read the full report
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Rochel Hoffman Partner – Deloitte M&A, ESG
ESG is a rapidly emerging board and C-suite issue, and it is increasingly a core component of corporate strategy. There’s no doubt, deal success in the future will be contingent on taking a proactive approach to ESG deal strategy. This will allow businesses to take advantage of opportunities associated with a low carbon, sustainable future, and mitigate ESG concerns to avoid impacts on value. Read the full report
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Andrew Hirst Partner – Corporate Finance
The Deloitte M&A team in New Zealand is starting to see increased instances of valuation gaps between buyers and sellers. This is consistent with a key theme from the 2022 survey –showing valuation is the greatest challenge to M&A success in the current economic environment. Read the full report
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Tapan Parekh Partner – Deloitte M&A, Valuations
This year’s survey reveals that 80% of respondents believe the valuation of assets will be their greatest challenge in 2022 and 2023. This confirms market sentiment in the current environment, and we expect this to affect the speed of the transaction process. Read the full report
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Tony Garrett Partner – Deloitte M&A
According to the results of our 2022 survey, there will be significant opportunities for business growth in the coming year, and most respondents expect the size of M&A deals to increase. This sets the scene for an vibrant M&A market, even though economic headwinds will present headaches – and headaches often present exciting M&A opportunities when there is still much capital to deploy. Read the full report
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Cathryn Lee Director – Deloitte Access Economics
M&A leaders are well placed to weather the economic uncertainties that cloud the outlook. A high proportion of survey respondents are confident there will be growth opportunities in their sector and, to a slightly lesser extent, that credit will be available at favourable conditions. Read the full report
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Lee Dryden Partner – Deloitte M&A
The market is evolving. Expedited synergy capture on recently completed deals is on more survey respondents’ minds this year than in 2021. This is because businesses are looking to deliver on the initial deal thesis which underlines the importance of being integration ready. Read the full report
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Tammy Peacock Partner – Corporate Finance, NZ
Overall, New Zealand respondents had a more pessimistic view of the economic outlook and felt that uncertain market conditions would impact their M&A activity. Despite this sentiment, New Zealand respondents still expected deal activity to hold broadly constant with 2021. Read the full report
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John O’Mahony Partner – Deloitte Access Economics
M&A can serve as a catalyst for companies to combat disruption, which in turn can enable business growth and reduce operational costs. Read the full report
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James Chown Partner – Deloitte M&A, Financial Services
Rising interest rates are causing angst for many Australian and New Zealand businesses, but they are expected to drive increased profitability for banks and insurers in the year ahead before potential credit loss headwinds seriously emerge. Our fifth survey revealed this challenging macro environment is favourable for the large players in the financial services sector from an M&A perspective. Read the full report
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