After a blockbuster 2021, conditions were much more challenging last year— but there are glimmers of hope on the horizon.
In 2022, market turmoil, looming SPAC regulations, inflation, interest rate hikes and geopolitical issues combined to create an uncertain environment. IPO market activity was driven mainly by macro/nano cap companies, with only 16 companies raising over $100 million, including DFIN clients TPG Partners, Bausch + Lomb, ProFrac Holding, PepGen, CinCor Pharma, Arcellx, Third Harmonic Bio, AMTD Digital, Amylyx Pharmaceuticals and HilleVax.
The good news is many are currently trading above issue.
SPAC IPO activity saw a significant decrease from 2021; it was more in line with 2019 levels, with 83 SPACs raising a total of approximately $12 billion. Liquidations and deal terminations certainly captured the attention of many, as SPACs made tough decisions to liquidate before year end, returning approximately $24 billion to investors.
Nevertheless, approximately one hundred companies did complete their merger with a SPAC and made their public debuts; a 50% decrease from 2021 but well above what we saw in 2020. This contributed to DFIN reaching the milestone of 1,000 clients on our ActiveDisclosure financial reporting platform, including Greenlight Biosciences, Akili Interactive, ProKidney, NewAmsterdam and Scilex.
Dealmakers continued to look to acquire public companies in 2022 but, unlike 2021, at deep discounts following stock market declines. DFIN was proud to support some of the largest M&A and take-private deals including McAfee, Avalara, Citrix Systems, Covetrus, Bottomline Technologies, Nielsen and Twitter.
2023: activism, dry powder and much-needed clarity
What can we expect for 2023? Given the disconnect between intrinsic and market value for many companies, activists will look to unlock potential for shareholders, including at companies involved in a SPAC merger. SPINs, including the much-anticipated General Electric’s GE Healthcare, are expected to begin trading, with more to follow such as Jefferies Financial Group’s spin-off of Vitesse Energy.
In addition, the trillions of dollars in global private equity dry powder will fuel M&A and continue the intense pace of take-private activity. Unicorns and larger IPO candidates currently in the IPO pipeline will look for the IPO window to open, likely in the second half of 2023.
With several proposed SEC rules expected to be finalized, 2023 could bring much-needed clarity to help stabilize markets and investor confidence. Companies should prepare now for new M&A opportunities, including consolidations, IPOs, take-privates and divestments, including SPIN-offs.
Beyond the world of deals and markets, several powerful trends will continue through the new year. Despite economic jitters, the employment outlook remains strong, raising the possibility that this year might see the first-ever “full-employment recession.” With competition for workers likely to remain high, it is especially important for employers to up their recruiting and talent retention games — prioritizing remote work options, employee education and opportunities for advancement.
Moreover, with supply chain issues still impacting companies across industries and geographies, resilience — in all dimensions — will continue to be top of mind. Enterprises will benefit by identifying key suppliers and customers and perhaps looking to reshore operations.
It doesn’t end there. Understanding, and addressing, the risks to physical assets posed by climate change will be increasingly important — as will protecting data and technology systems from sophisticated cybersecurity threats.
Reflecting on our performance in a challenging year — our sixth as a standalone company — I am so proud of our wonderful DFIN team, which supports a diverse and robust client portfolio with industry-leading solutions that help companies with fundraising, public company readiness, IPOs, DeSPACs, M&A transactions, Corporate Spinoffs, and SEC & financial reporting.
I wish you all a wonderful New Year and look forward to a prosperous 2023.