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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


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

What's next for SPACs?

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

3 min read

New SPAC listings went on a rollercoaster ride through 2021. The first quarter saw 278 SPAC IPOs in the US, raising US$92.8 billion. This fell significantly to 51 listings, raising US$11.8 billion in Q2 as the SEC indicated it would take a tougher approach to regulating SPACs. New SPAC IPOs then rose again in Q3, with 77 listings worth US$15.7 billion and then in Q4, with 144 listings worth US$29.2 billion.

While the signs are that the IPO pace may pick up a little in 2022, the main story of the year will be what happens with de-SPAC mergers. These declined over the second half of 2021, from 122 mergers worth US$253.4 billion in H1 to just 86 valued at US$162.3 billion in H2.

With so much capital seeking deals and the requirement to complete transactions within the usual two-year timeframe, competition will be strong for high-quality companies. It is likely that those with some experience and track record with SPACs will be most successful in finding the strongest deals and generating interest from PIPE investors.

Although the technology and life sciences sectors will continue to be the primary picking grounds for SPACs, there is now some interest in more traditional industries. Among the largest transactions of the year was the US$9.2 billion merger of Luxembourg-based industrial firm Ardagh's metal packaging business with Gores Holding IV, a SPAC backed by PE firm Gores Group.

SPACs have also been looking for targets beyond US borders, including in Western Europe and Israel, as sponsors and investors have become more comfortable with cross-border transaction structures. India is also becoming an interesting market for mergers, given the scale of its market, the growth of the technology sector and the increasing amount of private equity investment there looking for an exit. De-SPAC deals targeting assets outside of the US jumped from 31 transactions in 2020 to 94 in 2021, while value leaped by an astounding 589 percent year-on-year to US$207.2 billion.

Given recent statements by the SEC, it seems likely that regulatory changes to SPACs will emerge over the next year or two, with potential reform to forward-looking statements and transparency requirements. The overall thrust of any changes would be to bring de-SPAC mergers more in line with traditional IPOs. On the state law front, in In re Multiplan Corp. Stockholders Litigation, Delaware Court of Chancery applied the entire fairness standard of review to breach of fiduciary duty claims brought against the SPAC's directors, officers and its controlling stockholder, due to alleged conflicts between the SPAC's fiduciaries and public stockholders in the context of a value-decreasing transaction. The uncertainty introduced by this decision to the standard of review applicable to a de-SPAC transaction is expected to result in additional litigations.

We're also seeing some creativity emerge in SPAC PIPE fundraising processes. Many investors already have exposure to these investments and so sponsors are looking to make PIPEs more attractive by, for example, offering common shares at a discount to the US$10 price, having some form of warrant attached, or deploying preferred or convertible preferred structures.

Overall, it will continue to be an active market subject to continued evolution through 2022 and beyond.

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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.

© 2022 White & Case LLP

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