Our View: Pickup in M&A activity likely to continue into 2022

If you've been paying attention lately, you'll notice that the mergers and acquisitions activity picked up significantly in 2021, following a year when it was tough to get a deal done. And as the year draws to a close, the wheeling and dealing has been happening at breakneck speed.

There's been a little something for everyone when it comes to M&A. From mega-deals involving some of the top names in the tire and rubber industry, down to some of the smaller players making strategic purchases or getting an influx of funds by selling to private equity.

For the tire industry, the marquis sale happened earlier in the year, with Goodyear's $2.5 billion purchase of Cooper Tire & Rubber Co., which helped the Akron-based firm solidify its place as the world's No. 3 tire maker.

Bridgestone Corp. also found a new owner for its Firestone Building Products unit—a top player in the rubber roofing market—in a $3.4 billion deal that will allow Bridgestone to reinvest in its core tire business. And Denmark's Danfoss finally closed on its purchase of the Eaton Hydraulics business for $3.3 billion, which brings with it a major hydraulic and industrial hose operation.

There also was serious money changing hands on the supply side of in the industry. Celanese paid $1.15 billion for ExxonMobil's iconic Santoprene business. DL Chemical bought Kraton for $2.5 billion, Eastman Chemical sold its tire additives business for $800 million and DuPont is poised to buy Rogers Corp. in a deal worth $5.2 billion.

Economist Bill Wood of Mountaintop Economics & Research Inc. cautioned against making connections between the wave of M&A deals and the COVID-19 pandemic. He said there are favorable market conditions and an influx of capital, two factors that make conditions ripe for acquisitions. He did say the pandemic exposed where companies are vulnerable, allowing leaders to determine which acquisition targets will pay off the most.

Bill Ridenour, of Polymer Transaction Advisors Inc., said tax law uncertainty has been a factor in the number of deals getting done. Any tax increases would bring down acquisition prices as the after-tax proceeds will be less than private equity groups have come to expect.

And if you happen to be looking to sell a company or asset, Ridenour has this projection: there likely will be fewer buyers in the market next year, also leading to lower prices because of the lack of competition to boost sales prices.

So if it looks like a seller's market now, that may not be the case come 2022.