Now that we’re through 2022 (how did that happen?) we’ve been able to see some prominent trends take shape with regards to mergers and acquisitions. Coming off the tail of COVID-19, its impact is still felt — and other global events will undoubtedly impact the mergers and acquisitions of businesses from Milan, to Madrid, and yes, even to Minnesota.
As business owners and lawyers, the team at MNCLS follows merger and acquisition trends closely. Considering we started our careers in the construction industry, and now help Minnesota construction professionals navigate the law, understanding merger trends within the construction and engineering space benefits both us and our clients. If you’re a business owner and see a merger or acquisition on the horizon, it’s likely in your best interest to monitor these trends. If you’re a construction professional with no business to merge, pay attention all the same — because there’s a good chance they will impact you in one way or another.
How Trends are Set
Much in the way that fashion trends originate on stuffy runways in far-flung places and trickle all the way down to Gap and Old Navy, U.S. merger trends are similarly influenced by global activity. All this is to say: While billion-dollar mergers may seem of little importance to a contractor in Minnesota, the seismic impact of global trends can send ripples across the entire industry.
Therefore, with the exception of specific instances, record highs in the global M&A market tend to mean record highs in the U.S. market. In 2021, both the global and U.S. mergers and acquisitions markets saw extraordinary highs — with the U.S. seeing $2.9 trillion in transactions in 2021, up 55% from 2020. Coming off of this record high the 2022 market was expected to follow a similar trend, but the “unprecedented circumstances” we’ve all grown familiar with seemingly had other plans. Apart from the overall downward trajectory of the merger and acquisition market, here are some other notable construction merger trends from 2022.
Force Majeure Exceptions
COVID-19 might be largely in the rearview mirror, but its impact is still felt by construction industry professionals and others who are having to cope with a crippled supply chain. The coronavirus has also had an impact on merger and acquisition trends, as there is now an understanding of the inherent risk in mergers between sellers, buyers, and merging partners. With the possibility of another unprecedented global event looming around every corner, this trend is expected to extend to other force majeure events. MNCLS is seeing more and more construction businesses starting to include Force Majeure and Act-of-Government clauses in their contracts to protect their livelihoods, which is another trend we expect to see develop.
Uncertainty Surrounding the Ukraine War
Though 2022 was expected to build on 2021’s record merger and acquisition market, Russia’s invasion of Ukraine has been nothing short of a wet blanket for market growth. The U.S. construction industry was not insulated from this impact, as American businesses cautiously wait to see the full impact of this conflict. As of June 2021, however, rising commodity costs due to the crisis in Ukraine and uncertainty around its lasting impact have already begun to slow growth — with the inflated cost of diesel having the greatest impact on the construction industry. With that said, MNCLS likes to look at things from every angle: If this conflict persists, we may begin to see more mergers as construction businesses look to reduce risk and maximize their profits.
Emphasis on Environmental, Social, and Governance Factors
Environmental considerations have long been an important factor in merger and acquisition transactions, yet that emphasis is expected to strengthen in 2023 and beyond. Although abiding by “environmentally-friendly” practices may seem counterintuitive to productivity, increased corporate governance — another expected trend — can increase the efficiency of resource allocation and therefore improve both efficiency and environmental impact. What does this trend mean for Minnesota construction professionals? In addition to adhering to the state’s sustainability standards, businesses anticipating a merger or acquisition should prepare to face heightened scrutiny to prevent deals from falling through at the 10-yard line.
Stay Up on Merger Trends With MNCLS
Keeping up with construction merger trends is one thing, but understanding the implications they have on your business is a different story entirely. MNCLS can not only help you unpack the construction merger trends of 2022 but also serve as your trusted advisors — ensuring you make the trends work for your business.