North American, Global M&A Hits Record

Editorial Staff

22 February 2022

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.