M&A deals, along with private equity exits, IPOs and the exercise of stock options, are important liquidity events that wealth managers need to track as sources of new HNW individuals.

North American mergers and acquisitions – big drivers of liquidity events that wealth managers must track – hit a record high in the fourth quarter of 2021 reaching more than 4,400 transactions, figure from PKF O’Connor Davies showed.

Total 2021 deal volume stood at 16,718 – also a record high and a 25 per cent increase over 2020.

With easy access to capital, low interest rates, and a recovering economy, M&A globally set a new record with more than $5 trillion in transaction value. The US deal market’s performance was particularly prominent, accounting for $2.9 trillion in transaction value in 2021, up 55 per cent from $1.9 trillion in 2020. The US deal activity was also bolstered with sellers concerned over potential increases in capital gain tax rates and 2020 deals pushed into 2021 due to COVID-19, the report said.

“Some headwinds such as persistent inflation, rising interest rates, supply chain and labor shortage challenges, as well as softening equity markets, may have a moderating impact on M&A transaction volume. As the market continues to be driven by these macro-trends, we are bullish on M&A activity in 2022, especially in the middle and lower middle market,” it said.

The report said that 2021 was also a banner year for the private equity industry. US private equity organizations closed 8,624 deals for a combined value of $1.2 trillion, more than 50 per cent above the previous annual record for deal value. In 2021, US private equity firms raised more than $300 billion in new capital, as institutional investors increased their alternative asset class investment percentage. Last year was also a record for PE-backed exits. Private equity firms exited US companies with a total enterprise value in excess of $800 billion.

Venture capital financings last year also hit a record, with $621 billion in combined deals, more than double the $294 billion recorded in 2020. Venture capital deal-making in the US reached an all-time high in 2021 at nearly $330 billion, buoyed by excess liquidity and an accommodative monetary policy. 

Dry powder
Global private equity dry powder stood at $2.3 trillion at the end 2021, 14 per cent higher than at the start of the year. As of June 30, 2021, US PE had an all-time high in capital overhang of $827 billion.

Cash on the balance sheets of non-financial companies in the S&P 500 rose to more than $2.0 trillion, compared with $1.5 trillion before the pandemic crisis in early 2020.