Hello and welcome to the 4Q 2021 edition of the Stephens Investment Banking Quarterly Update. Our last three months of the year were full of brisk deal flow, as we worked closely with clients to help them enter 2022 on target to achieve their strategic and financial goals. This edition of the Quarterly Update features exclusive perspectives from senior bankers in every sector and subsector that we serve, on both the major trends of 2021 and what’s on their radar for the year ahead. I hope you find it useful.
The firm announced in December that Nathan (Nate) Mittag joined Investment Banking as Managing Director within the Financial Institutions Group. Mr. Mittag focuses on Depositories, a core capability and practice of Stephens, and assists in the firm’s dedicated coverage of banks across every region of the US. He is based in New York and has amassed extensive experience in his field over a 14-year career. Mr. Mittag holds a BA in economics from Bucknell University. In the 12 months prior to his hire, the FIG team created over $8 billion of combined capital markets and M&A transaction value for clients. This includes Depositories such as community and regional banks, thrifts and other financial institutions.
Maximo Blandon, Managing Director in Energy & Clean Energy Transition, participates in our newest Capital Thinking webinar. This entry features perspective from executives at Denbury, Orion Infrastructure Capital, and CleanBay Renewables. Len Vermillion, Editorial Director for Oil and Gas Investor, moderates the panel. They explore how innovative companies in the space are accessing capital to pursue alternative energy projects while maintaining a focus on ESG initiatives. Registered attendees can watch their conversation starting on Feb. 1.
Two of our London based bankers – Hugh Elwes, Managing Director in the Financial Services Group, and Simon Tilley, Managing Director in the Financial Sponsors Group – recently held a virtual chat on crucial developments in the private equity, asset management, and wealth management sectors. They discussed sponsor and trade capital flows, transatlantic deal activity, factors driving consolidation, and more. Watch their conversation:
World Congress 2021 - London
Robin was a panel speaker at a session on Enterprise Software Investment Trends and M&A Strategies. The panel's discussion included transformational growth strategies in the digital era, the extent to which M&A is enabling software firms to expand their core offering vertically and horizontally, as well as financing to support deal flow for software firms of various sizes.
PopX Webinar – Smart MSP
Robin chaired a virtual event that Stephens hosted in association with the PopX platform for digital Managed Service Providers. The webinar provided actionable insights for owner operators and C-level executives who are using Smart MSP capabilities to achieve scale without also exponentially increasing costs, while maximizing valuation potential.
Throughout 2021, consumer spending continued to be a foundational support for the economy, including within our core Consumer subsectors. Many M&A participants and capital markets issuers are still adjusting to a “new normal.” The Restaurant sector is a prime example, as it repeatedly adjusted to evolving COVID-19 safety precautions throughout 2021. In 2022, we expect the Consumer sector will continue to generate elevated M&A and capital markets activity.
Energy & Clean Energy Transition
Elevated commodity prices last year triggered increased activity in upstream Acquisitions & Divestitures, along with healthy investor interest in oil and gas SPACs conducting IPOs. Commodity prices and deal activity are likely to stay robust this year. Yet companies are looking to ascertain when public equity capital markets will open up. Traditional IPO activity remains relatively slow, although a good pipeline is building and follow-on activity was up year-on-year. As for clean energy, 2022 may well be the year when it becomes standard for public and private investors to demand material ESG and renewables commitments before committing capital.
Diversified Industrials & Services
The passage of the federal $1.2 trillion infrastructure package last year stands to improve M&A and capital raising activity across the sector. Meanwhile global supply chain disruptions characterized by a tight labor market, port congestion, and equipment shortages benefited mainly Transportation & Logistics companies. In Aerospace & Defense, air travel in major locations improved in 2021 to approach levels seen prior to the pandemic, while President Biden’s 2022 budget mostly upheld full defense spending amid elevated geopolitical tensions. Building Products, Construction Materials and Services enjoyed rising housing demand, higher spending on repair and remodel services, and an appetite for infrastructure spending.
Financial Institutions Group
The need for achieving scale drove a resurgence in bank M&A last year, with Depositories partnering with tech companies to increase growth and/or operational efficiencies. Consolidation across the asset management and wealth management spaces was quite strong, driven by fee pressure, technology upgrades, client demands, and private equity buyers deploying excess capital. Multiple M&A deals approaching or surpassing $1 billion in valuation occurred in the Specialty Finance subsector, such as those involving home improvement lenders or point-of-sale technology platforms. In 2022, a central theme will be how the pace and extent of interest rate hikes facilitates middle market capital raising.
Health & Life Sciences
The sector experienced record levels of M&A, IPO and private fundraising activity in 2021. On the M&A front, there was $181 billion of total announced deal volume across 881 transactions in 2021, more than doubling the prior year volume. We believe this level of activity was fueled by record levels of capital availability, continued (and in certain cases accelerated) industry tailwinds, and an overall heightened interest from both strategic and institutional investors to participate in sectors where COVID-19 magnified the value proposition. Given the variability in COVID-impact on businesses across the sector, investors have become creative with how to validate sustainability and underwrite COVID-impacted businesses. Looking forward, we believe 2022 is positioned for continued record levels of activity.
Technology, Media & Telecom
The total value and volume of TMT M&A deals climbed globally in 2021. Vertically Focused Software Application companies pursued more efficient cloud-based solutions. Security Software and Healthcare IT experienced record M&A and investment activity, as well as near-record valuations due to strong strategic and financial interest. Payments processing firms conducted several notable IPOs, debt offerings, and private investments. At least five online Media streaming deals occurred, including IPOs and acquisitions, ranging in value from $900 million to $43 billion. Private equity firms and strategic buyers alike showed healthy interest in wireless and utilities Telecom services. There is little sign that TMT deal flow will abate in 2022.