Despite volatility in the markets due to geopolitical instability, interest rate hikes and inflation, mergers and acquisitions (M&As) have been active in 2022. More than 2,000 deals have been made, with a total value of about $2 trillion.
While the M&A market is down from historic highs in 2021, its numbers are fairly even with pre-pandamic levels.
"Uncertainty always weighs on decision making, and M&A is a big decision for deal makers," said Andy West, global coleader of McKinsey & Company's M&A Practice, in an article on its website. "So naturally we’re seeing a bit of a slowdown."
But some analysts express optimism around the change in pace.
"With a slightly slower market, you can take your time to really understand the drivers of the asset that you're considering," remarks Oliver Enger, senior partner at McKinsey's, in the article. "You can cultivate the management team and the employees that you are about to embrace and create something that's far better than merely a 'transaction.'"
The following is a quick recap of the six biggest merger and acquisition deals of 2022.
Microsoft's Acquisition of Activision Blizzard
There were many acquisitions in the video game industry this year, from Netflix (NFLX) purchasing six indie studios to beef up its gaming initiative to Sony's (SNEJF) purchase of Bungie, the developer behind the popular game series "Halo."
But none made bigger headlines than Microsoft's (MSFT) offer to buy Activision Blizzard for $69 billion -- a move that the FTC is suing to stop. The agency claims the acquisition would "harm competition in high-performance gaming consoles" by denying or degrading access to its gaming content by rival console makers.
If the acquisition is finalized in 2023, it would give Microsoft access to a slate of IPs that have proven big sellers with gamers for decades such as "Call of Duty," "World of Warcraft," "Overwatch," and "Candy Crush Saga."
Broadcom Acquisition of VMWare
In May, Broadcom (AVGO) agreed to acquire VMWare (VMW) in a cash-and-stock deal that would value the former cloud computing division of Dell Technologies (DELL) at about $61 billion.
"Building upon our proven track record of successful M&A, this transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software as we reimagine what we can deliver to customers as a leading infrastructure technology company," said CEO Hock Tan at the time.
"Combining our assets and talented team with Broadcom's existing enterprise software portfolio, all housed under the VMware brand, creates a remarkable enterprise software player," added VMware CEO Raghu Raghuram. "Collectively, we will deliver even more choice, value and innovation to customers, enabling them to thrive in this increasingly complex multi-cloud era."
The deal is expected to close late in 2023.
AMD Acquisition of Xilinx
The trend of consolidation in the semiconductor industry continued when AMD (AMD) announced it had completed its acquisition of Xilinx on Feb. 14.
The all-stock deal had a price tag of $49 billion, much higher than the $35 billion originally floated when the deal was first announced in October 2020. The increased value reflected the rise in AMD stock price that occurred after the announcement.
"The acquisition of Xilinx brings together a highly complementary set of products, customers and markets combined with differentiated IP and world-class talent to create the industry’s high-performance and adaptive computing leader," said AMD President and CEO Dr. Lisa Su in a press release at the time.
But now, with AMD shares trading around $71, the stock price has tumbled 62% since the completion of the deal. Shareholders of AMD possibly thought the company had paid too steep a price for the acquisition.
Oracle Acquisition of Cerner
Oracle Corp. (ORCL) completed its acquisition of medical software maker Cerner Group. in June of 2022. Larry Elison’s software giant paid $95 a share in the all-cash transaction, which valued Cerner at $28.3 billion. Oracle CEO Safra Catz said the deal was well worthwhile because "We expect this acquisition to be substantially accretive to Oracle’s earnings on a non-GAAP basis in fiscal year 2023,” in a statement at the time the deal closed. “Healthcare is the world’s largest and most important vertical market -- $3.8 trillion last year in the United States alone,” Catz said, adding "We expect Cerner to be a huge growth engine for years to come.”
Mike Sicllia, Oracle’s executive vice president, industries, said Oracle will focus on changing the user interface for Cerner’s systems. "We will make Cerner’s systems much easier to learn and use by making hands-free voice technology the primary interface to Cerner’s clinical systems”
Oracle shares are up nearly 20% since the acquisition was completed, although they remain well below their price when the deal was first announced a year ago.
Kroger Merger With Albertsons
Rival supermarket companies Kroger (KR) and Albertsons (ACI) shocked many in October when they shared plans for a merger that is one of the largest deals in the grocery industry's history. Subject to regulatory approval, Kroger would purchase Albertson's for about $24.6 billion.
The combined company would give Kroger stores in 48 states and create a supermarket chain that would compete with non-grocery companies such as Walmart and Amazon that have squeezed the industry in recent years.
"An argument can be made that a stronger combined company could possibly help reduce food inflation as it would have more negotiating power to push back against food producers’ proposed price increases,” said Krisztina Katai, equity research analyst at Deutsche Bank. "It would also mean greater competition for food manufacturers. This comes at a time when consumers are increasingly looking for value and trading into private brands to help reduce the strain of higher food prices."
Prologis Merger With Duke Realty
Real estate investment trust Prologis, Inc. (PLD) announced its acquisition of Duke Realty on Oct. 3 in an all-stock transaction.
The deal was valued at about $23 billion and will expand Prologis' presence in U.S. markets, the company said.
"In addition to the day-one accretion and avenues for further earnings growth, this acquisition gives us an even stronger ability to support our customers and their growth," said Prologis Co-founder, CEO and Chairman Hamid R. Moghadam. "We're gaining high-quality properties and more than 500 new customers in key markets. These new customers will be able to tap into our Essentials platform, which delivers end-to-end solutions to address critical supply chain challenges and contributes to their broader sustainability efforts."
Prologis and Duke Realty are betting on a positive future for the eCommerce sector, while many analysts are less optimistic. Shares of Prologis are up 9% since the deal was announced.