GLOBAL merger and acquisition (M&A) activity shattered all-time records in 2021, comfortably erasing the high-water mark that was set nearly 15 years ago, as an abundance of capital and sky-high valuations fuelled frenetic levels of dealmaking.

The value of M&A globally topped US$5 trillion for the first time ever, with volumes rising 63 percent to US$5.63 trillion by Dec. 16, according to Dealogic data, easily surpassing the pre-financial-crisis record of US$4.42 trillion in 2007.

“Corporate balance sheets are incredibly healthy, sitting on US$2 trillion in cash in the United States alone — and access to capital remains widely-available at historically low costs,” said Chris Roop who co-heads North America M&A at JPMorgan.

Technology and health care, which typically account for the biggest share of the M&A market, led the way again in 2021, driven partly by pent-up demand from last year when the pace of M&A activity fell to a three-year-low due to the global financial fallout from the COVID-19 pandemic.

Companies rushed to raise funds from stock or bond offerings, large corporates took advantage of booming equity markets to use their own stock as acquisition currency, while financial sponsors swooped on publicly listed companies.

Moreover, robust corporate earnings and an overall bright economic outlook gave chief executives the confidence to pursue large, transformative deals, despite potential headwinds such as inflationary pressures.

“Strong equity markets are a key driver of M&A. When stock prices are high, that usually corresponds with a positive economic outlook and high CEO confidence,” said Tom Miles, co-head of Americas M&A at Morgan Stanley.

Overall deal volumes in the United States nearly doubled to US$2.61 trillion in 2021, according to Dealogic. Dealmaking in Europe jumped 47 percent to US$1.26 trillion, while Asia Pacific rose 37 percent to US$1.27 trillion.

“While China cross-border activity has been modest, corporates from other Asian countries have stepped up to buy global assets. We expect to see this trend continue, especially for deals in Europe and the United States,” said Raghav Maliah, Goldman Sachs’ global vice chairman of investment banking.

A number of the year’s biggest transactions — AT&T Inc.’s US$43 billion deal with Discovery Inc. and the US$34 billion leveraged buyout of Medline Industries Inc. — were announced during the first half of the year.

But the pace of dealmaking showed no signs of slowing in the second half.

On Nov. 21, KKR made a bid approach for Italy’s biggest telecom operator, Telecom Italia, valuing it at roughly US$40 billion including net debt in what would rank as the biggest ever private equity buyout in Europe should it go ahead, and the second largest globally.

Easy availability of financing drove private equity deals, with volumes more than doubling from last year to a record US$985.2 billion, according to Dealogic. (SD-Agencies)