According to S&P Global Market Intelligence, cheap debt, strong corporate valuations and a stronger-than-expected recovery from the first waves of the pandemic drove deal-making into record-breaking territory.
Private equity (PE) houses accounted for approximately two-thirds of global merger and acquisition (M&A) activity, according to data from research firm Mergermarkets.
Global M&A deals reached a record of more than $5.6 trillion last year, while those that involved PE reached a record of 8,548 deals worth an announced $2.1 trillion in value, a 60% increase over 2020’s $1 trillion total and nearly double the previous record set in 2007 of $1.1 trillion. PE buyouts also made up 27% of global M&A activity in 2021, the highest percentage on record since 2006, as PE firms looked to spend cash they had accumulated during the pandemic.
According to S&P Global Market Intelligence, cheap debt, strong corporate valuations and a stronger-than-expected recovery from the first waves of the pandemic drove deal-making into record-breaking territory.
The technology, media and telecom sectors received the lion’s share of M&A deals, reaching $1.8 trillion—double the previous record of $896 billion in 2020, with PE deals accounting for $784.2 billion. This includes the top PE buyout of the year—KKR’s proposed takeover of Telecom Italia, valued at $40 billion. Health care also attracted a lot of private equity, with the number of deals increasing year on year by 47%.
Preqin’s 2022 Global Private Equity Report authors found that PE returns continue to outperform public markets.
“While the pandemic caused a significant amount of disruption in the global economy, the policy response from the authorities in many nations was swift and powerful,” states Cameron Joyce, vice president of Research Insights at Preqin. “As a result, private equity activity has significantly increased on a wave of liquidity and positive investor sentiment. Although concerns around inflation have been growing, the outlook for the global private equity market remains positive.”
In a November 2021 survey conducted by Preqin, researchers found that institutional investors were keen to deploy more capital into emerging markets private equity in the longer term, with fintech, healthtech, e-commerce and edtech in India, Vietnam and Indonesia highlighted as attractive options. Low interest rates and favorable valuations in Japan and Australia also promise opportunities for buyout funds, while the report cites growing investor interest in earlier-stage investments, regardless of region.
