A boardroom is seen at the legal offices of the law firm Polsinelli in New York City, New York, U.S., June 3, 2021.
A boardroom is seen at the legal offices of the law firm Polsinelli in New York City, New York, U.S., June 3, 2021. Reuters / ANDREW KELLY

Mergers and acquisitions activity has tailed off after a record-breaking 2021, as the war in Ukraine adds to a bevy of distractions faced by corporate boards and management in their existing businesses.

Bankers and lawyers speaking at the Tulane Law conference in New Orleans on Thursday noted that while conversations were still taking place and deals would continue to get done, the market volatility of recent weeks has made signing off on acquisitions more tricky.

"I'm finding myself, as a banker, advocating 'no' to selling a company much more than I ever have before," said Gordon Dyal, the managing partner of investment banking advisory Dyal & Co.

"No matter how attractive that premium is, the chance the deal falls apart and it's 18 months or 12 months from now, even if you negotiate a huge break fee, it doesn't matter because it does not compensate a company for its lost franchise."

The widespread economic and geopolitical upheaval caused by Russia's invasion of Ukraine is having significant ramifications on companies' operations, sucking up the attention of leadership and putting some inorganic growth plans on the backburner.

"It's very hard to have a board meeting to talk about M&A deals when you're sitting there wondering whether your general manager in Russia is going to go to jail for who knows how long, in a country where all of a sudden there truly are no rules," said Scott Barshay, chair of the corporate department at law firm Paul, Weiss, Rifkind, Wharton & Garrison.

Global dealmaking this year through mid-March is down around 20% on the same period in 2021, according to data provider Refinitiv.

While megadeals have tailed off, in the face of heightened regulatory scrutiny from the Biden administration, private equity firms continue to deploy substantial cash piles into new purchases.

Refinitiv data shows that while overall dealmaking is down, transactions involving buyout firms globally are up 12% year-to-date.

For corporations though, the ripples from war in Eastern Europe, which Russia calls a "special operation", are creating challenges on the back of emerging from the COVID-19 pandemic, plus supply chain issues and inflationary pressures.


A unique aspect of this is that many corporate boards, which have been refreshed with new directors in the last two years - either by choice or amid investor pressure - have not met in person during the pandemic, making building trust between boards and management more difficult.

Lawyers said this lack of connectivity makes boards more cautious about pursuing growth opportunities that could include acquisitions, sales or other structural changes.

"It is really hard to build up a sense of collegiality and trust and confidence in that environment. And, after all, boards are human beings and deals rely on people trusting each other and trusting the advice that they are receiving," said Melissa Sawyer, global head of M&A at Sullivan & Cromwell LLP.

The Tulane event, one of the most influential gatherings in the dealmaking community, is hosting its 34th edition in person, having been forced online last year by the pandemic. Its last live conference in 2020 took place just days before lockdown measures to contain COVID-19 were implemented.

As well as enjoying the benefits of meeting others in the flesh, and reestablishing professional and personal connections, the dealmakers spoke of confidence that their business would be equally buoyant in the months ahead.

"It's busy. It's still busy. I think on the public side, we're seeing a lot of deals," said Barshay of Paul, Weiss.

"I still have the numbers, even if the sizes are a bit lower."