Had the same issue initially. Called Apple support who debugged it via remote desktop. Turns out Sidecar uses iCloud for handshake between the two devices (god

Had the same issue initially. Called Apple support who debugged it via remote desktop. Turns out Sidecar uses iCloud for handshake between the two devices (god knows why), and for some reason requires 2FA on iCloud to be turned on for both the iPad and the laptop, on each device. I didn't have iCloud 2FA setup completed on the laptop, so it didn't work until that was resolved.