M&A Deals Hit $5 Trillion in 2021. What to Expect in 2022?

Jan 17, 2022

3 min


Nestle, Microsoft, Amazon, Pfizer, PayPal you probably know all these outstanding players in the international business arena. But why mention them? Because all of these organizations were involved in high-value 2021 M&A deals. 

Because 2021 reached a staggering $5T in M&A deals, let’s see what the future holds for 2022.

Booming M&A activity 2021: A favorable outlook for 2022

According to Reuters, the total value of M&A activity 2021 topped $5 trillion — a record for M&A transactions. To a large extent, the reason lies in fast-growing stock markets and cheap financing. In turn, Anu Aiyengar, Global Co-Head of M&A for J.P. Morgan, had this to say:

“M&A is a confidence game. With political certainty, the end of the pandemic in sight, and strong capital markets, the confidence levels in the C-suite and board rooms are high. That bodes well for M&A”.

Indeed, compared with the previous year, mergers and acquisitions deals 2021 were 64% more active. Thus, such a rise signifies sustainable transaction growth in 2022.

What were the top three M&A market 2021 obstacles?

Oddly enough, COVID-19 is not on the list of problems. According to The Dykema M&A Annual Survey, only 35% of Americans surveyed consider the pandemic a common hurdle over the past year. So what turned out to be more challenging on the way to dealmaking? 

  1. Economic uncertainty. Changing economic conditions are one of the most common causes of conflict between parties. It is because instability prompts buyers to revise prices. New deal structures, including SPACs (Special Purpose Acquisition Companies), are another source of controversy.
  2. Availability of quality targets. In general, large private, profitable, and highly-leveraged companies  with low liquidity become quality targets. On the other hand, buyers prefer small, fast-growing public companies to have lower levels of profitability, leverage, liquidity, and valuations. 
  3. Financing. This aspect is partly due to the workload of lenders at the end of the year. To complete pending transactions on time, they are busy dealing with due diligence, negotiation of documents, etc.

2022 M&A outlook

A KPMG study found that American business leaders expect an increase in M&A deals again in 2022. However, they agree that factors such as inflation, high valuations, and lack of quality targets may limit the number of transactions. Another element influencing M&A trends 2022 is potential tax and capital cost increases.

UBS believes that mergers and acquisitions in 2022 will be a tool for developing and growing corporations and sponsors. They think this applies to IT companies in particular, which have not lost their positions after COVID-19.

It is noteworthy that co-chair of M&A DLA Piper Jon Kenworthy also predicts higher activity in the tech sector, as it is at the forefront given the imposed restrictions. We already have an example of a major IT M&A in 2021 — Slack and Salesforce.

Reputable expert investor Jesse Felder believes that the pace of dealmaking depends on:

  • High levels of dry powder from public and private organizations
  • Low interest rates
  • Accumulated supply and demand from both the buyer and the seller
  • Necessity to reduce pandemic stress among directors

To sum up and forecast the state of the M&A market in 2022, here is what the global head of M&A at KPMG, Philip Isom, had to say on this issue:

“Based on the volume of new pitches in November and December — transactions that would come to market in Q1 and Q2 of 2022 — there are no signs of a slowing deal market”.