These days, strong environmental, social, and governance (ESG) credentials are a must to have any chance of successfully participating in a deal. ESG has become a fundamental part of the value creation plan, and limited partners are attaching increasing importance to ESG as it matures. That said, ESG remains difficult to put into practice, owing to a lack of transparency.

In times of volatility and uncertainty, investors are especially keen to have a clear picture of the various risks involved in a deal. Alongside traditional financial and legal due diligence, other due diligence areas will take on added importance in the coming year, including commercial; cybersecurity; ESG; human capital; IT and software; marketing and brand; operational; and risk.

With financing more difficult to secure, there are fewer large deals on the markets. The price-to-earnings multiples are too high, and sellers are still thinking in yesterday’s amounts. Meanwhile, buyers and investors are looking more critically at growth sustainability, and whether a company’s business model makes sense in these uncertain times.

Traction will continue in the mid-market segment, and companies and private equity investors that have introduced a buy-and-build strategy will continue down that path. Family businesses with succession worries are also likely to continue to sell.

For the time being, venture capital investments will continue to increase, driven by government funds and social trends.

Although the value of acquisitions is 35% lower than the same period last year, the outlook is generally positive. However, with less competition for targets and many companies that have recently gone public underperforming, there are opportunities to be seized.

There are also barriers. Banks have lost billions on loans they can’t resell due to high interest rates, meaning borrowing has become more difficult. What’s more, US funds are ignoring Europe due to the higher risk profile. Uncertainty in the market means deals are more difficult and taking longer to close, while labor shortages are also hindering growth plans.

The mergers and acquisitions (M&A) market is more or less back where it was before the pandemic – and considering our VUCA environment, today’s numbers are by no means unhealthy. Let’s take a look at the trends in five key areas of the M&A landscape.