2021 Was a Record Year For M&A - And 2022 Could be, Too

After the trials and tribulations of 2020, no one really knew what to expect going into 2021. Yet, for the world of M&A, it couldn’t have been a more pleasant surprise.

Last year has most certainly been a record year for M&A deals, making a huge comeback from 2020. In 2021, the number of announced deals exceeded 62,000 globally. That’s up an unprecedented 24% from 2020. Deal values reached an all-time high of $5.1 trillion.

Almost all sectors are showing signs of recovery from 2020. Values are up and multiples are rising, with strategic M&A multiples at an all-time high (a median multiple of 16x EV/EBITDA).

2022 is expected to continue on a deal-making course, with concerns around changing fiscal policy and regulations, ongoing supply chain issues, and competition from investors that are sitting on plenty of dry powder. Global economic growth is also playing a major role. This year, acquisitions are expected to focus heavily on technology being picked up by non-tech companies to improve digitalization and cybersecurity, as well as purchases that help to diversify or improve supply chains. Bolstering data analytics capabilities is also a significant motivator for deals. Healthcare also will continue to see a need for solutions that improve the efficiency of care. Another area expected to see activity is financial tech, as digital banking and payments become more commonplace.

In the information technology sector, M&A transactions also reached new heights, with November of 2021 being particularly active. The month celebrated the highest sector deal announcement and the most aggregate technology deal values. Total IT deal volumes reached 248 in the US (up 28.5% year over year), pushing total 2021 tech transaction values to nearly twice the previous annual record. And it is surely worth noting that—in almost every week of 2021—private equity firms have announced a technology transaction over $1 billion.

In 2021, activity was up in the media and telecommunications industries, with 804 announced deals. That’s a 27% increase over the comparable 12-month period one year earlier. The value of deals in the sector totaled a record $233 billion. Private equity deals in this space also reached record levels. PE’s share jumped from 24% in 2018 to 37% in 2021, representing an unsurpassed $104 billion in announced deal value. This included several large SPAC transactions in digital media and online gambling. With online gambling being legalized in more and more US states, we can expect more buyout targets to include sports data, content providers, and gaming and app developers.

Deals in the medtech space also hit record levels. The first half of 2021 alone outpaced the entire year of 2020, reaching a combined $31.5 billion in value. And 2022 is expected to surge past these levels, with all players in the space focusing on rapid and highly competitive growth strategies.

Widespread talent shortages are another reason that ample M&A deals have occurred and are expected to continue this year. Using M&A to acquire talent is a significant motivator for many companies that will pursue transactions as a way to address labor shortfalls, at the same time that many businesses are trying to create more agile workforces.

Sustainability initiatives are also among the motivating factors behind more M&A transactions. Investors, regulators, and other stakeholders are growing more supportive of making changes to environmental footprints, also knowing that sustainable businesses can be more adaptable to market shifts. Environmental, social and governance (ESG) issues are also taking a spotlight.

Private equity played a significant part in driving up M&A volume in 2021, with firms increasing their role in transaction value by more than 55%. A good bit of this activity can be attributed to their anticipation of a possible hike in corporate capital gains taxes in the US. There is also concern surrounding the raising of interest rates, which will drive up borrowing costs for players that rely on debt financing to get deals done.

Now that we are in 2022, get ready for the momentum to continue. A recent study by Mergermarket of 300 top dealmakers reported that 64% believed that M&A activity will increase this year.

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