M&A market exceeded expectations in 2021

Here's why the 2022 corporate finance trends look promising too

2021 was a historic year for global mergers and acquisitions (M&A). And if the developing trends in corporate finance are anything to go by, then the M&A market will keep growing in 2022 as well. While organizations stay optimistic, they will have to find creative ways to conduct dealmaking if another pandemic-like disruption threatens to derail their momentum.

2021: A marvelous year for M&A

The beginning of 2021 was a critical time for Deloitte Corporate Finance LLC (DCF), coming off a strong period of deal closings at the end of 2020. While many predicted that it would be difficult to match the second half of 2020 in deal volume, companies continued to perform well. The year-over-year metrics stabilized as pandemic-induced demand and supply shocks were removed from the last twelve-month financials. Some factors that led to positive capital market trends are:

  • Changes to the capital gains tax rate kept getting extended.
  • The availability and cost of debt capital became increasingly favorable.
  • More money was allocated to alternative investments.
  • In the first half of 2021, the popularity of special purpose acquisition companies (SPACs) hit all-time highs as a means of taking companies public.
  • Many private business owners looked to complete M&A processes before year-end, given proposed changes to capital gains taxes under the Biden administration.

According to Mergermarket, through the first three quarters of the year, deals worth more than $4.2 trillion were agreed to, a figure surpassing the totals of any single calendar year period over the past five years. And DCF global completed more than 660 transactions in 2021.

2021 Year-in-review / 2022 Industry Outlook

The 2022 Outlook: What's in store for this year?

As 2022 gets underway, many of the drivers of the record 2021 growth are still at play, giving business owners and investors reasons to be optimistic. For instance, private equity firms still have significant capital to invest. Deloitte's "2022 M&A Trends Survey" showed that 92% of respondents believe that deal volume will increase or stay the same over the next twelve months, and 75% of corporate executive respondents believe that the size of their organizations' deals will increase over the same period.

What could derail the growth engine?

Some factors can increase uncertainty for global M&A activity. Another major pandemic, for instance, can potentially inhibit firms' appetites for M&A. Similarly, other variables include the effects of rising inflation on businesses, increases in debt pricing, labor and material shortages, supply chain constraints, and growing backlogs.

Yet, despite such uncertainty, the world continues to adapt and find creative ways to conduct dealmaking, emphasizing the importance of M&A as a tool to help companies grow. Therefore, despite the challenges that may occur, 2022 will usher in many opportunities, potentially setting up another record-breaking year of M&A.

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