Global M&A volumes in 2021 pass $5 trillion for the first time

Funds, corporates and financiers – flush with cash and encouraged by soaring stock market valuations – struck 62,193 deals, up 24% from the year before

General Electric's break-up was one of the biggest developments in the M&A sector in 2021. AP

Global deal making is expected to maintain its scorching pace next year, after a historic year for merger and acquisition activity fuelled largely by easy availability of cheap financing and booming stock markets.

Global M&A volumes topped $5 trillion for the first time, comfortably eclipsing the previous record of $4.55tn set in 2007, Dealogic data showed. The overall value of M&A stood at $5.8tn in 2021, up 64 per cent from a year earlier, according to Refinitiv.

Flush with cash and encouraged by soaring stock market valuations, large buyout funds, corporates and financiers struck 62,193 deals in 2021, up 24 per cent from the year before, as all-time records tumbled during each month of the year.

Investment bankers said they are expecting the deal-making frenzy to continue well into next year, despite looming interest rate increases.

Higher interest rates increase borrowing costs, which may slow down M&A activity. Deal advisers, however, still expect a flurry of large mergers in 2022.

Helpful monetary policies from the US Federal Reserve fuelled a stock market rally and gave company executives access to cheap financing, which in turn emboldened them to go after large targets.

The US led the way for M&A, accounting for nearly half of global volumes. The value of M&A nearly doubled to $2.5tn in 2021, despite a tougher anti-trust environment under the Biden administration.

The largest deals of the year included AT&T's $43 billion deal to merge its media businesses with Discovery; the $34bn leveraged buyout of Medline Industries; Canadian Pacific Railway's $31bn takeover of Kansas City Southern; and the break-ups of American corporate behemoths General Electric and Johnson & Johnson.

According to a survey of deal makers and advisers by Grant Thornton, more than two thirds of participants believe deal volumes will grow despite challenges posed by regulations and the pandemic.

Deals in sectors such as technology, financials, industrials, and energy and power accounted for the bulk of M&A volumes. Buy-outs backed by private-equity firms more than doubled this year to cross the $1tn mark for the first time, according to Refinitiv data.

Despite a slowdown in activity in the second half, deal making involving special purpose acquisition companies further boosted M&A volumes in 2021. Spac deals accounted for about 10 per cent of the global M&A volumes and added several billion dollars to the overall tally.

Updated: December 31st 2021, 9:30 AM