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Record breaker: US M&A 2021

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US M&A had an extraordinary year in 2021, with total deal value reaching US$2.6 trillion—surpassing US$2 trillion for the first time

M&A roars into 2022 on momentum of a record-shattering year

Challenges loom—including the possibilities of tighter regulations, rising inflation and a stock market correction—but markets show little sign of slowing down

The value of US M&A blew past the US$2 trillion mark in 2021, ending the year more than 30 percent above the previous record set in 2015. US deal value reached US$2.6 trillion, twice the value of 2020, and volume set a new record at 7,896 transactions.

Confidence reigned among dealmakers as stock markets continued to rise; increasing numbers of SPACs sought merger targets; and private equity houses set new records, deploying some of the sector's historic levels of dry powder. All of which was underwritten by flexible and cheap debt financing.

Technology was a major driver of M&A, fueled by pandemic-related trends that continued to accelerate deployment of digital technologies across all sectors. The tech sector itself led the sector charts. Companies with product mixes boosted by the pandemic, including those in the pharma and healthcare sector, turned to M&A to complement and add to their existing business portfolios.

Despite a continuing positive outlook, dealmakers will need to keep potential risks in mind in 2022. Under the Biden administration, CFIUS went on a recruitment drive, and it will clearly continue to take a more aggressive stance across sectors, particularly when deals involve technology.

Indeed, regulatory scrutiny is tightening from a number of angles. The Securities and Exchange Commission under chair Gary Gensler is taking a tougher stance on enforcement and has its sights set on SPACs, cryptocurrencies and ESG. And the Federal Trade Commission has announced far-reaching antitrust policy changes that may require companies that reach settlements to observe a ten-year mandatory clearance period on new acquisitions and disposals—the new rules would even apply to buyers of affected assets.

This increasingly tough approach to regulating M&A has so far had little impact on dealmakers' appetites for transactions—although new rules may eventually render some deals less attractive.

In response to recent inflation, the Fed will increase interest rates, which could pose another challenge for dealmakers. But given that rates are so low by historical standards, increases are unlikely to have any direct significant effect on M&A for most of 2022.

One of the biggest questions is whether stock markets will continue to hold up. A correction seems inevitable at some point, but it's unclear what might trigger one in the foreseeable future. For example, markets seem to have shrugged off concerns related to the emergence of the Omicron variant of COVID-19—at least at the time of writing. And private equity still has a mountain of capital to deploy. Recent events, however, suggest that markets will be volatile.

As a result, although regulatory hurdles continue to multiply, we expect 2022 will be another strong year for US M&A, with robust activity through the first half and possibly well beyond.

 

Surging M&A surpasses expectations

All the stars aligned in 2021, creating a confident and exceptionally busy M&A market

Record breaker: US M&A 2021

Record year for private equity dealmaking

Transaction values more than doubled year-on-year, as firms deployed ever-larger amounts of dry powder

Record breaker: US M&A 2021

What's next for SPACs?

Dynamics may be changing as the focus shifts to de-SPACs and regulatory scrutiny intensifies

Record breaker: US M&A 2021

Sectors

Sector overview: Strong M&A activity pervades nearly every sector

In what was a stand-out year, M&A picked up the pace in almost every sector

Record breaker: US M&A 2021

Oil & gas M&A trends up due to recovery in demand and the pressing need for clean energy

Dealmaking may continue to rise, as price volatility abates and companies embrace energy transition

Record breaker: US M&A 2021

Technology M&A continues record run

The pervasiveness of technology, particularly since the pandemic, continues to drive deals to all-time highs

Record breaker: US M&A 2021

Pharma and healthcare deliver strong results

Despite the absence of megadeals, M&A in the sector climbed from 2020 levels thanks in part to strong PE and SPAC activity

Record breaker: US M&A 2021

Real estate deals come back to life

After dropping in 2020, real estate M&A ramped up significantly in 2021

Record breaker: US M&A 2021

In Focus

Antitrust: Extended timelines and broader scope

The Federal Trade Commission is taking an increasingly stringent approach to antitrust investigations

Record breaker: US M&A 2021

Cross-border deals face increased CFIUS scrutiny

Increased sector scope and concerns around a more aggressive approach to identifying non-notified transactions is leading to rising numbers of filings

Record breaker: US M&A 2021

SEC enforcement ramps up

Dealmakers should be braced for a more aggressive stance under Chair Gary Gensler

Record breaker: US M&A 2021

Financing likely to continue largely as is, despite inflationary worries

Borrower-friendly terms over the past few years have helped boost M&A totals—and a number of factors suggest the financing will not change dramatically in 2022

Record breaker: US M&A 2021

Good security practices for data and networks are essential to M&A success

With data privacy laws tightening and cyberattacks on the rise, due diligence of technology networks and data processes should be a top priority for dealmakers

Record breaker: US M&A 2021

Notable decisions from Delaware courts

In the second half of 2021, Delaware courts issued several decisions affecting M&A dealmaking

Record breaker: US M&A 2021

What's in store for 2022?

Five factors that will shape dealmaking over the coming 12 months

Record breaker: US M&A 2021
Record breaker: US M&A 2021

Real estate deals come back to life

After dropping in 2020, real estate M&A ramped up significantly in 2021

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2 min read

In a significant rebound, M&A values in real estate rose sharply in 2021. Deal value rose to US$121.7 billion, a sharp increase of 229 percent compared to 2020. Deal volume rose by 79 percent to 70 transactions.

Consolidation in the real estate investment trust (REIT) space was a major driver of activity throughout the year. This trend was already evident pre-pandemic but has accelerated since. The biggest deal of the year was one such transaction: Realty Income's acquisition of VEREIT for US$17 billion. The deal brought together two net lease-focused businesses and allowed them to spin off all their office property assets into a new REIT.

Tech takes over

As in other sectors of the economy, the real estate sector is seeing the immense value of telecommunications and technology assets. Three of the top-five largest real estate transactions of the year involved investments in technology.

KKR and Global Infrastructure Partners' US$15.3 billion acquisition of CyrusOne, American Tower's US$9.5 billion tie-up with CoreSite and the US$8 billion investment by Blackstone in QTS Realty are the most prominent examples of this trend in 2021. All three targets were REITs holding data center properties—an area of intense interest among investors, as demand for data storage and connectivity has risen with accelerating digitalization and the use of big data across industries.

It seems likely that appetite for assets that support accelerating digital adoption, such as data centers, will continue through 2022.

Return to retail and leisure

As the economy continued to re-open through 2021, consumers returned to leisure activities that were less available or largely off-limits in 2020. Indeed, the second-largest deal of the year demonstrated renewed interest in leisure assets. The US$16.6 billion deal saw hospitality and entertainment-focused REIT VICI Properties buy MGM Growth Properties, which owns large-scale casino and hotel assets, including the MGM Grand and The Mirage.

As the COVID-19 pandemic enters its third year, some retail businesses are seeing a way forward toward growth in spite of persistent headwinds. Indiana-based Kite Realty's US$4.5 billion acquisition of Illinois-based Retail Properties of America is an example of this. Both parties to the transaction operate open-air shopping centers, which according to Kite have performed well during the pandemic. The company also cited the rise in curbside pickup for online orders as a growth area when announcing the deal.

Top real estate deals 2021

  1. Realty Income acquired VEREIT for US$17 billion
  2. MGM Growth Properties was acquired by VICI Properties for US$16.6 billion
  3. CyrusOne was bought by KKR and Global Infrastructure Partners for US$15.3 billion

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