The $1 Trillion-A-Quarter Global M&A Market Milestone – White & Case

The $1 Trillion-A-Quarter Global M&A Market Milestone - White & Case 2

Michael Deyong | Germaine Gurr | Nathalie Nègre-Eveillard | Jonathan Olier

Deal value exceeded US$1 trillion in every quarter for the first time in history, in just one example of the record-shattering 2021

Global dealmaking was consistently strong in 2021, with the value topping US$1 trillion in each quarter for the first time on record. This achievement is particularly impressive given the tumultuous deal environment, as M&A becomes an indispensable tool for growth across the globe. 

The year’s combined deal value came in at US$5.7 trillion. It’s the first time annual deal value has passed the US$5 trillion mark on Mergermarket record (since 2006), easily surpassing 2015’s previous record of US$4 trillion. With 25,982 announced deals, annual volume also achieved an all-time high.

TMT stands ahead of the rest 

While 2021’s record activity was driven by strong performance across a number of sectors, the technology, media, and telecom (TMT) sector continues to lead the way. Since 2016, deal volume within TMT has posted annual increases every year—reaching a new peak of 6,834 deals in 2021.

Total TMT value came to a staggering US$1.8 trillion globally. Not only was this more than double the previous record of US$896 billion in 2020, but in no previous year on Mergermarket history has any sector even topped the US$1 trillion mark in a single calendar year. Not only did TMT hit that milestone in 2021, but it smashed it, with close to US$2 trillion in value.

Reflecting TMT’s dominance, eight of the top ten deals of the year took place within the sector. The race for market share in the global streaming market fueled the highest TMT valued deal of the year—Discovery’s US$96.2 billion acquisition of the WarnerMedia business segment from AT&T 

The immense level of deal activity in the TMT sector was reflective of the digitalization trend, which has only accelerated since the start of the COVID-19 pandemic. In fact, delving into the data shows that the technology subsector alone achieved more than a trillion dollars in deal value in 2021; there were 5,813 tech transactions across the year, worth a total of US$1.3 trillion.

Healthcare deals post new high 

Dealmaking within the pharma, medical and biotech (PMB) sector was another success story of 2021. The sector attracted 2,458 deals worth a total of US$497.4 billion over the course of the year—up 67% in value compared to 2020, while volume increased by 33% to reach an all-time annual high.

The highest valued deal to take place within the sector was the US$34 billion sale of US medical supply manufacturer Medline to a PE consortium led by Carlyle—reportedly the largest leveraged buyout since the financial crisis.

 Buyout activity targeting the PMB sector has steadily increased over recent years, reaching a record volume of 912 deals in 2021, while a total of US$247.5 billion was spent.

Rebounding sectors 

Although TMT dominated the headlines in 2021, the year also saw a recovery in deal activity among the sectors that had been most negatively affected by the COVID-19 pandemic. The industrials & chemicals and the consumer/retail sectors, for example, saw total M&A value top 2019 levels, after taking a dive in 2020.

The industrials & chemicals sector recorded a robust total of US$708.4 billion in deal value globally across 2021, above 2020’s total of US$398.7 billion, setting a new annual value record. Volume similarly rose to 4,249 transactions, a 32% increase year on year, and a 12% rise on 2019.

Meanwhile, the consumer sector (which includes retail), recorded 2,221 deals throughout 2021, worth a total of US$311.7 billion. This compares to only 1,767 deals worth US$213.6 billion the previous year, and tops 2019’s total of 2,121 transactions worth US$217.2 billion.

Regional records 

Although every region worldwide saw annual increases in terms of both M&A value and volume, 2021 was characterized by impressive regional performances. US deal value, for example, doubled from US$1.3 trillion in total M&A value in 2020 to US$2.6 billion in 2021.

Western Europe and Asia, meanwhile, each saw their total annual M&A value surpass US$1 trillion for the first time on Mergermarket record. Both regions recorded total deal value of US$1.3 trillion in 2021. In terms of volume, Asia saw 5,639 transactions and Western Europe saw 9,211.

SPAC boom far from over 

Although SPACs had a rollercoaster year, with an outsized number of IPOs in Q1, they remain an important aspect of the market despite slowing in the second through fourth quarters due to moves by the SEC to subject assets to greater scrutiny.

In total, there were 302 de-SPAC M&A deals globally in 2021, worth US$622.9 billion, according to Dealogic. This was more than double the 120 of 2020, and nearly three times the 2020 of US$221.2 billion.

Although the SPAC phenomenon remains mainly a US one, given the high levels of competition for assets, SPACs are looking beyond US borders for targets, and new SPAC regimes are emerging in locations as far flung as Singapore and Hong Kong. There were 94 de-SPAC deals targeting assets based outside the US in 2021, worth a total of US$207.2 billion.

Among them was the US$34.7 billion merger between Singapore-based Grab Holdings and SPAC Altimeter Growth Corp—previously the highest valued SPAC deal on record at the time of its announcement in April. Grab Holdings, which operates a “super app” enabling ride-hailing, food delivery, financial services, travel booking and online shopping, has been named Asia’s most valuable start-up.

Outlook 

The year 2021 will go down in history as a remarkable year for global M&A, as dealmakers put their cash to work following a tumultuous 2020. TMT and healthcare remain sectors to watch, and they will continue to ride of the wave of digitization, fueled by the pandemic, which is encouraging intense competition and healthy valuations.

Whether global dealmaking can continue at this pace is difficult to predict. Despite a return to global GDP growth in 2021 and vaccination rollouts in many countries, the emergence of the Omicron variant of the coronavirus demonstrates the fragility of the recovery process. At the same time, the global economy is dealing with inflationary worries and potential increases to interest rates in several key jurisdictions, as well as geopolitical tensions on multiple fronts.

But with an abundance of cash, cheap financing and sky-high valuations, dealmakers will likely remain comfortable pursuing large transactions, especially with digitalization and the energy transition as strong motivating forces.

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