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M&A activities around the world improved considerably in 2021, shattering the 2007 record of $4.42 trillion and setting a new one.
Global merger and acquisition (M&A) activity has smashed through the all-time record in 2021, setting a new mark at $5.63 trillion. The previous high-water mark stood for about 15 years at $4.42 trillion. Throughout its history, M&A value has never surpassed $5 trillion until now. In fact, only last year, the global pandemic suppressed M&A deals to its lowest in three years.
However, this year, rapidly increasing levels of dealmaking benefited from a general availability of capital, in addition to lofty valuations. The co-head of North America M&A at JP Morgan, Chris Roop, said:
“Corporate balance sheets are incredibly healthy, sitting on $2 trillion of cash in the U.S. alone – and access to capital remains widely available at historically low costs.”
By December 16th this year, M&A deals were up by 63%, according to data from financial markets analytics platform Dealogic. Furthermore, deals in the US almost doubled in value to $2.61 trillion, while in Europe, this number jumped 47% to $1.26 trillion. In the Asia Pacific, dealmaking rose 37% to $1.27 trillion. Also, private equity deals surged to $985.2 billion due to an abundance of easy access to seamless finance options.
Takeaways from M&A Record Activity in 2021
M&A deals in the technology and healthcare spaces led the way – a typical trend in most years. Furthermore, this sector also benefited from the pent-up demand carried over from last year due to Covid.
Companies generated funds from stocks and bonds, while large corporations leveraged strong equity markets, staking their own stocks as acquisition currency. Furthermore, financial sponsors rushed in on publicly listed companies. The booming corporate earnings clime and a fast-rebounding economy bolstered the confidence in CEOs to make deals. Many of them angled for huge, transformative deals in spite of the potential threat of inflation. Tom Miles, co-head of Americas M&A at Morgan Stanley, weighed in on this trend, explaining:
“Strong equity markets are a key driver of M&A. When stock prices are high, that usually corresponds with a positive economic outlook and high CEO confidence.”
Many of the year’s biggest M&A transactions took place during the first half. This included AT&T Inc’s massive $43 billion deal with Discovery Inc, and Medline Industries Inc’s $34 billion leveraged buyout. However, the second half of 2021 also featured some notable deal-making activities. For instance, KKR moved to acquire Telecom Italia, Italy’s biggest telecoms operator, for approximately $40 billion.
Luigi de Vecchi, chairman of Europe, Middle East, and Africa banking capital markets advisory at Citigroup, also touched on M&A 2021 surge. As de Vecchi put it, “Investors are deploying cash at an unprecedented pace”. He however added that only time would tell if the enormous influx of cash and sky-high valuations were a prudent decision.
Luigi de Vecchi also asserted that company executives constantly seek targets that present favorable climate credentials. This is due to the growing pressure and repeated calls to make businesses’ greener’ and more climate-friendly.