Global M&A volumes hit record high in 2021, exceeding $5 trillion

Publicly disclosed deal values reached all-time highs of $5.1 trillion including 130 megadeals with a deal value greater than $5 billion, a whopping 57% higher than in 2020 and smashing the previous record of  $4.2 trillion set in 2007, according to PwC’s latest report.

The often-frenzied M&A activity in 2021 was fueled by intense demand for technology, and for digital and data-driven assets, and the pent-up deal-making demand from 2020 that was unleashed.

M&A activity last year was fueled in large measure by intense demand for technology, digital and data-driven assets, and the unleash of pent-up deal-making demand from 2020.

The record levels of deal-making in 2021 were evident across all regions, reflecting the strong bounce-back in the global economy, with Asia Pacific showing a 17% growth in deal volumes over the prior year.

Private equity continues to capture more, and larger, deals. Almost 40% of deals in 2021 involved a PE fund, up from just over a quarter for the past five years, and PE firms are doing bigger deals, accounting for 45% of total deal value in 2021, compared to 30% over the past five years.

Heading into 2022, PE has ramped up its deal capacity. Global PE capital ended 2021 at $2.3 trillion, 14% higher than the start of the year – providing plenty of fuel for M&A activity in 2022. While funding is abundant, there will be increasing pressures on PE to find ways to create value in an environment of rising interest rates, higher multiples and Environment, Social and Social pressures.

Sharing view of PwC, Bain & Company saw the highest M&A deal value in history. In 2021, corporate dealmakers raced to acquire transformative capabilities and scale rapidly amid soaring valuations. This led to a record-breaking year for M&A deal values, exceeding expectations at an unmatched $5.9 trillion. 

Despite the high prices, new research suggests an optimistic outlook for deal activity in 2022. Bain’s global survey of more than 280 executives shows a full 89% anticipate their own deal activity will stay the same or increase this year.

The environment for deal making remains fundamentally attractive, and a well-balanced mix of market signals suggest the strategic M&A market will continue to be robust.

Tech M&A strategic deal value has increased an astounding 64% since 2016, reaching a total of nearly $708 billion in 2021 and accounting for about 19% of all strategic M&A. Major tech companies are buying dozens of small targets each year, many doing a deal every week or two, often with the goal of adding valuable capabilities that will improve their core business.

Bain’s research shows 96% of big tech players’ M&A now goes to deals with less than $500 million in deal value. This frequent, small M&A strategy requires a distinct approach, where buyers must focus on talent, preserving the culture and the capability they are buying. Revenue synergies also become more critical, as the potential for cost synergies diminish with smaller capability deals.

A soaring outlook for 2022 despite headwinds

As economic optimism remains high, the global M&A market is expected to soar in 2022, with deal volume and valuations continuing to reflect a dynamic market and an abundance of capital.

However, the pandemic-induced disruptions to the global economy present numerous structural or financial hurdles for deals in 2022, including higher interest rates, rising inflation, increased taxes and greater regulation.

Even so, business leaders are seemingly undaunted by these macroeconomic headwinds as 77% of CEOs expect global economic growth to improve during the year ahead, finding from the 25th edition of PwC’s annual global CEO survey.

Furthermore, over 50% of CEOs reported high levels of confidence for revenue growth in their own companies over the next 12 months; led by CEOs of private equity (67%) and technology companies (64%), two sectors which saw the highest M&A volumes and values in 2021.