After record highs, M&A activity hits a few bumps

Global M&A deal activity surged to $5.9 trillion in 2021 and after a mixed first half in 2022, some analysts predict a strong second half for the year.

Investors, buyers, and sellers are still savouring a blockbuster 2021, when deal activity was off the charts. According to Bain & Company's M&A Report 2022, total mergers and acquisitions reached $5.9 trillion globally in 2021, an all-time high. Strategic transactions — which include both corporate deals and add-on acquisitions — reached $3.8 trillion, an increase of 47% over 2020. These high numbers were fuelled in part by record valuations and a lot of activity by private-equity firms and other buyers scouring the market for targets.

By all accounts, though, the M&A bustle in 2021 was simply not sustainable. "The amount of activity in 2021 wore people out," noted David Braun, founder and CEO of US-based M&A advisory firm Capstone Strategic Inc. and the author of Successful Acquisitions: A Proven Plan for Strategic Growth.

Back to reality

Thus, it's no surprise that 2022 has been a bit of a dawdler so far. While numbers differ depending on the source, there's a strong sentiment out there that things have slowed — just a little. Worldwide deal-making hit an impressive $1 trillion in the first quarter of 2022, but that was 21% less than last year's record opening quarter, reported UK-based financial market data organisation Refinitiv in its M&A Q1 2022 report. Cross-border mergers and acquisitions plummeted 48% from Q4 2021 — a hectic period as buyers and sellers scrambled to close deals — and dropped year-on-year by 24%.

And while January and February started out strong in 2022, with the largest year opening since 2000, deal activity waned a bit in March and then rebounded again in April, said Lucille Jones, a UK-based deals intelligence analyst in Refinitiv's Investing and Advisory division.

"Deal-making is always directly linked to confidence in the market," she noted. "With the exception of real estate, we've seen declines in every sector from last year, both by the number and value of deals." Real estate has continued to rumble throughout. In June, for example, Sunstone Hotel Investors announced that it had completed its acquisition of The Confidante Miami Beach hotel from an affiliate of Hyatt Hotels Corp. for $232 million.

Why the slowdown? The war in Ukraine, supply chain issues, energy prices, labour concerns, and rising inflation and interest rates, along with the exhausting activity in 2021, all contributed to the slight downturn this year. COVID-19, with its ongoing variants, has also put a damper on global travel, slowing or halting some cross-border transactions.

Of course, many of the published industry statistics are indicative of the number of deals actually closed, and that doesn't always give a crystal-clear picture of activity going on in the M&A market, noted Will Jackson-Moore, Global Private Equity, Real Assets, and Sovereign Investment Funds leader for PwC in London. Investment banks, M&A business brokers and advisers, private-equity firms, independent sponsors, and search fund entrepreneurs have consistently been active behind the scenes on a global scale.

"The number of [M&A] projects we're working on is still very robust," Jackson-Moore said. "Our revenues will be up in 2022 versus 2021, and we're not seeing any material slowdown at the moment." The geopolitical uncertainty will likely have some impact globally, but so far the deal market remains healthy, he added.

Braun echoed that sentiment. "We're continuing to be very active in the market on the buy side and sell side, and we've definitely seen an uptick in the middle market for sell-side activity," he said.

The middle market

Without question the middle market operates in its own little bubble. While big transactions, such as Microsoft's pending $68.7 billion acquisition of Activision Blizzard, tend to garner all of the media attention and set a tone, deals in the middle market and lower middle market are quietly generating interest from private equity and other buyers in the US and other regions. Braun, for instance, is currently working on projects in Spain, Belgium, France, and Switzerland, despite the war in Ukraine. M&A players have some anxiety over the future, but business continues, albeit not quite at the clip of the vigorous 2021.

So what does this all mean? "What you have seen is definitely a pause, particularly in markets where public companies are involved in an M&A transaction," Braun said about global deals. "It was a bit of a catch-your-breath in the first part of the year, and they now are starting to look again at investment opportunities and re-engage in negotiations with companies."

With interest rates rising, valuations have also seen a "mild softening", noted Jackson-Moore. Even so, these rates "are still low from a historical standpoint", and valuations "are becoming more normalised", Braun said. Challenges with labour, inflation, and supplies are even prompting some company owners to sell and get out, particularly in the middle market or lower middle market. "Some sellers are saying, 'I'm done. I'm tired of this stress,'" or they don't want to miss an opportunity to exit while the market is still sizzling, Braun added.

Q3 and Q4 outlook

While things could change in an ever-volatile world, Braun and Jones (along with Refinitiv) predict a strong 2022 for global M&A, with the second half being stronger than the first. Private-equity firms, especially, have raised record levels of funds in recent years and have "a lot of capital to be deployed", Jones said. "We're still at a high level compared to previous years."

What's more, ageing business owners looking to sell, coupled with transactions that offer good strategic value to buyers, make for "really strong ingredients for a continuing strong market", Braun said.

Cheryl Meyer is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Oliver Rowe at