US M&A roars into 2022 on the momentum of a record-shattering year, but challenges loom, according to a new report by White & Case and Mergermarket

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US M&A had an extraordinary year in 2021, with total deal value surpassing US$2 trillion for the first time on record, but potential challenges may loom in 2022, according to a new report, Record breaker: US M&A 2021, by global law firm White & Case LLP and M&A data provider Mergermarket. 

The report outlines that confidence was exceptionally high among dealmakers in 2021, with US deal value reaching US$2.6 trillion, twice the value of 2020, while deal volume set a new record at 7,896 transactions. Drivers of activity included megadeals of US$5 billion or more accounting for nearly half of US M&A activity and private equity also remaining highly active, with deal value reaching US$987.8 billion—more than double the previous year's total of US$474.5 billion. 

"The stars aligned for US M&A in 2021, and supported by a soaring stock market and easy access to capital, we saw deal activity hit a historic high," said John Reiss, Global Head of M&A at White & Case. "We expect robust deal-making to continue in 2022, fueled by private equity holding record levels of dry powder and a high number of SPACs seeking merger targets. However, it's questionable if it will be another record-breaking year. Factors such as impending interest rate rises, a potential stock market correction and a stricter regulatory environment may make 2021's level of activity difficult to repeat." 

Regulatory scrutiny is tightening from a number of angles and may potentially slow down the progress of some deals in 2022, according to the report. CFIUS's increasingly aggressive stance is leading more parties in transactions that have remote ties to US national security opt to file voluntary bids in order to reduce uncertainty. Changes to antitrust policy, including the FTC and DoJ's temporary suspension of early termination of the Hart-Scott-Rodino waiting period and the FTC's implementation of pre-consummation warning letters, means dealmakers will need to factor in longer timelines and the potential for FTC involvement or investigations post-transaction. 

Reiss added: "Changes in regulation have made the M&A process more complex over the past year. Now more than ever, dealmakers need to understand early on where there may be regulatory hurdles to clear, and potentially pre-empt these with filings at the term-sheet stage." 

The report also notes that dealmakers should be braced for more aggressive enforcement from the SEC, with figures from the agency published in November 2021 showing a 7 percent increase on enforcement from 2020. Given the agency's recent statements, SPACs are set to be a particular area of focus, with the possibility of potential reform to forward-looking statements and transparency requirements mounting. 

Sector highlights include: 

  • Technology: Technology continues to be a major driver of M&A, with total value in the sector reaching US$790 billion in 2021, more than doubling 2020's value of US$339 billion. The US$1 trillion infrastructure bill, with its emphasis on the energy transition and the development of clean energy technology, is set to help boost technology M&A in 2022 and beyond 
  • Oil & gas: As the US economy moved out of COVID-19 restrictions through 2021, the subsequent increase in energy demand helped oil & gas M&A continue its recovery, with deal value jumping 24 percent year-on-year to US$102.7 billion. Absent a major shock, energy commodity prices are expected to be more stable in 2022, which should further unlock M&A opportunities in the sector 
  • Pharmaceuticals & healthcare: Healthcare and pharmaceuticals deals continued at a robust pace in 2021, with deal value rising to US$288.9 billion—a 38 percent increase on 2020. SPAC mergers involving healthcare companies played a strong role in driving activity, which may accelerate into early 2022, as sponsors and companies seek to get ahead of potential regulatory changes 
  • Real estate: M&A values in real estate rose sharply in 2021, with deal value rising to US$121.7 billion—a sharp increase of 229 percent compared to 2020. Consolidation in the real estate investment trust (REIT) space was a major driver of activity. Appetite for assets that support accelerating digital adoption, such as data centers, is expected to help drive activity in 2022

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