Global dealmaking will continue at its rapid pace over the next year, after a historic year of merger and acquisition (M&A) activity, largely driven by the easy availability of cheap finance and booming stock markets.
Global M&A volume topped $ 5 trillion for the first time, significantly beating the previous record of $ 4.55 trillion in 2007, according to data from Dealogic. The total value of mergers and acquisitions was $ 5.8 trillion in 2021, according to Refinitiv, up 64% year over year.
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Overflowing with cash and encouraged by soaring stock market valuations, large buyout funds, corporations and financiers completed 62,193 transactions in 2021, up 24% from the same period last year as records collapsed every month of the year.
Investment bankers said that despite looming interest rate hikes, they expect the deal frenzy to continue well into next year.
Higher interest rates increase the cost of borrowing, which can slow down M&A activity. Deal advisors, however, expect a spate of large mergers as early as 2022.
The Fed’s expansionary monetary policy has fueled a stock market rally and given corporate executives access to cheap finance, which in turn encourages them to pursue big goals.
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The United States led the way in mergers and acquisitions, accounting for nearly half of the world’s volume – the value of mergers and acquisitions nearly doubled to $ 2.5 trillion in 2021 despite a tougher antitrust environment under the Biden administration .
The biggest deals of the year included AT&T Inc.’s $ 43 billion deal to merge its media businesses with Discovery Inc .; the $ 34 billion leveraged buyout of Medline Industries Inc.; the Canadian Pacific Railway’s $ 31 billion acquisition of Kansas City Southern; and the dissolution of the American corporate giants General Electric Co and Johnson & Johnson.
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According to a survey of deal makers and consultants from Grant Thornton LLP, over two-thirds of respondents believe transaction volume will increase despite the challenges posed by regulations and the pandemic.
Transactions in sectors such as technology, finance, industrial, and energy and energy accounted for the majority of the M&A volume. Private equity firm-backed buyouts more than doubled this year, breaking the $ 1 trillion mark for the first time, according to Refinitive data.
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Despite a slowdown in activity in the second half of the year, dealmaking with special purpose vehicles continued to increase M&A volumes in 2021. SPAC deals made up about 10% of global M&A volume and added billions of dollars to the grand total.
(Reporting by Niket Nishant in Bengaluru; editing by Anil D’Silva)