Our thinking

Mixed Signals: US M&A FY 2022

What's inside

Despite a strong start to the year, deal activity in the US faced new challenges in 2022 as headwinds gathered.


Although the record-breaking deal activity of 2021 spilled over into 2022, headwinds in the first quarter developed into a significant slowdown during the rest of 2022, with an expectation of continued slowness as we enter 2023

This time last year, the US M&A market continued to be busy with deals in the pipeline from 2021, both deals proceeding to signing, and signed deals in the process of moving to closing.

However, it was evident from early in 2022 that new M&A activity was going to be down significantly from 2021. Cracks were already beginning to show the year before, as the Federal Reserve's language took a more hawkish turn. Talk of inflation being "transitory" shifted. By March, the Fed had made its first interest rate hike in four years. By mid-year, the S&P 500 had entered a bear market.

Since first tightening its monetary policy, the central bank has raised the federal funds target rate by a full 425 basis points (bps). This is the fastest pace of change in modern history. By December 2022, the brakes were being pumped a little less, rounding off the year with a 50 bps increase.

Nevertheless, Fed chair Jerome Powell's language remained resolute at a December 14 press conference announcing the increase: "We have covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do."

Officials forecast up to a total three-quarter point more in interest rate increases this year—the Fed's policy extending longer than many had anticipated. Some are still hopeful that a pivot is not far away. Bond markets have been calling the Fed’s bluff with two-year US Treasury yields peaking in November and dipping below the federal funds rate.

As inflation shows signs of rolling over and economic growth stalls, opinion is divided over what 2023 holds in store—a soft landing or a hard landing. Even if the Fed eventually walks back its recent comments with a course correction, that would suggest that it has overshot the mark.

What is clear is that the first half of 2023 will not carry with it the spillover momentum seen in early 2022, and some investors are bearish on how 2023 will fare. Nevertheless, another camp remains cautiously optimistic. Taken as a whole, 2022 put in a solid performance as compared to historic performance. The real story, however, is that deal activity trended down with each successive quarter as valuations fell, corporate equity issuances became less attractive and debt financing was increasingly costly and less accessible.

As the articles in this report demonstrate, we do not see an early return to a busy M&A market. Opportunistic strategic M&A will dominate until questions regarding a recession are answered and confidence in the stock market returns.

US M&A in review: Momentum can only take you so far

M&A started strong in 2022 with robust deal activity and megadeals dominating the landscape that was largely the result of unprecedented spillover from 2021. But then, things took a turn and deals stalled in the second half of the year, as shifting macro-economic conditions began to take hold.


Private Equity in focus

The US private equity (PE) market in 2022 aligned overall with the broader M&A trend—activity eased off considerably, year-on-year, but remained above historic levels—and like the M&A market at large, it tailed off as the year progressed, but what does this mean for the year ahead? 

Manhattan, NY


Sectors overview: M&A activity ebbs across

With some rare exceptions—namely in the oil & gas and energy sectors—deal activity was down in 2022 as a sense of fatigue set in following a prolonged period of high deal activity and as inflation and rising interest rate concerns took center stage.

oil pump jack

Technology leads the charge yet again

Technology continued to drive M&A activity in 2022 despite the odds being stacked against the sector.


PMB performs as pharma groups repurpose their portfolios

After a year of historic profits in 2021 following the mass roll-out of COVID-19 vaccines and related treatments, big pharma companies armed with cash for deals have been shifting their attention.


A flurry of activity early in 2022 sees real estate outperform

Real estate has historically shown resilience during challenging economic periods and is considered a reliable hedge against inflation—but not all assets are created equal, and dealmakers were highly selective in the transactions they pursued in 2022.


In Focus

Decisions from Delaware

Notable decisions from Delaware courts

In the second half of 2022, Delaware courts issued several decisions affecting M&A deal-making.

Supreme court of US


Possible return to “normal,” but it could take a while yet to get there: Six M&A trends for 2023

After peaking in 2021, the 2022 US M&A market was always going to seem slow by comparison—but what is likely to drive activity in the months ahead?

Manhattan, NY
building with trees

ESG is increasingly critical in US M&A, but greenwashing concerns persist

Environmental, social and governance concerns are being raised in M&A transactions across the board as regulatory pressure continues to climb

4 min read

Buyers are scrutinizing everything from an acquisition target’s projected greenhouse gas (GHG) emissions to ways in which a deal may impact their own climate mitigation strategies. In this regard, reliable and verifiable reporting of climate performance is set to become an essential tool for improving transparency.

Questions concerning the environmental sustainability of acquisition targets are increasingly important in M&A transactions. Buyers are scrutinizing everything from an acquisition target's projected greenhouse gas (GHG) emissions to ways in which a deal may impact their own climate mitigation strategies. In this regard, reliable and verifiable reporting of climate performance is set to become an essential tool for improving transparency.

Meanwhile, the government is increasingly focused on efforts to mandate extensive environmental, social and governance (ESG) disclosure. For example, in March 2022, the Securities and Exchange Commission (SEC) proposed rules1 that would require public companies to disclose information about their direct GHG emissions and certain indirect emissions from their supply chains and customers. Another proposed regulatory regime in the works is the Federal Supplier Climate Risks and Resilience Rule, announced by the Biden administration in November 2022. This proposed rule would require large federal government contractors to "disclose their greenhouse gas emissions and climate-related financial risks and set science-based emissions reduction targets."

Supply chain risk is another area of increasing scrutiny in M&A due diligence, and the government is once again placing this under the ESG spotlight. Buyers often assess reputational and litigation risks associated with potential human rights concerns in the supply chains of acquisition targets. For example, the supply of critical minerals will need to expand to support growing renewable energy production in the US. To mitigate supply chain risk, US regulations and laws, including the Inflation Reduction Act that was signed into law in August 2022, encourage investment in the domestic production of these materials and reliance on "friendly" foreign trade partners, with processes in place to avoid human rights abuses. For the time being, however, many renewables developers are heavily reliant on foreign sources of critical minerals, particularly China and the Democratic Republic of the Congo. Between the risk of enforcement under the Uyghur Forced Labor Prevention Act—signed into law in December 2021—and the potential for other regulatory scrutiny, these considerations can be important in M&A transactions and will become increasingly significant as the energy transition builds momentum and investment into renewable energy assets continues to rise.

Greenwashing claims

While climate reporting can be fundamental for M&A decision-making, a lack of defined standards and the marketing of ESG claims without support remain a concern. Allegations of greenwashing continue to run rife.

While climate reporting can be fundamental for M&A decision-making, a lack of defined standards and the marketing of ESG claims without support remain a concern. Allegations of greenwashing continue to run rife. In December, the House Committee on Oversight and Reform issued a follow-up memorandum to a report originally published in September 2022 entitled Investigation of Fossil Fuel Industry Disinformation.

The new memo focuses on inconsistencies between energy companies' public support for GHG emissions mitigation and internal statements indicating long-term commitments to fossil fuels. The Committee says that new internal documents show that energy companies' public support for carbon-capture technology and methane regulations are part of a larger effort to entrench fossil fuel use, specifically natural gas, rather than pursue emissions reductions.

While the Committee is unlikely to release significant additional documents or conduct further investigations into alleged greenwashing in the next two years, the attention of US lawmakers on these alleged misrepresentations means it is important for businesses to substantiate their environmental claims with objective data and analysis to mitigate greenwashing risk. The Federal Trade Commission recently began considering updates to federal guidance, commonly referred to as Green Guides, designed to prevent companies from making deceptive environmental benefit claims, as consumers increasingly demand environmentally friendly products.

These Green Guides have not been updated since 2012, before the current spotlight on ESG-focused investment. Clear guidance from the government on how companies can accurately describe the environmental benefits of their products and carbon credits generated from activities that sustainably manage natural ecosystems would be a helpful area for the Green Guides to update. The deadline for public feedback is February 21, 2023. This will be one of several forthcoming steps aimed at improving ESG transparency among companies across the country, with more expected to come.

1 https://www.whitecase.com/insight-alert/sec-proposes-long-awaited-climate-change-disclosure-rules

White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.

This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.

© 2023 White & Case LLP