LONDON / HONG KONG, Dec.20 (Reuters) – Global merger and acquisition (M&A) activity broke all-time records in 2021, comfortably erasing the high point that was set almost 15 years ago, as abundance of capital and sky. high valuations fueled frenzied levels of trading.

The value of mergers and acquisitions globally topped $ 5,000 billion for the first time ever, with volumes rising 63% to $ 5.63 trillion on Dec. 16, according to data from Dealogic, easily surpassing the pre-financial crisis record of $ 4.42 trillion in 2007.

“Corporate balance sheets are incredibly healthy, resting on $ 2 trillion in liquidity in the United States alone – and access to capital remains widely available at historically low costs,” said Chris Roop, co-lead of mergers and acquisitions in North America at JPMorgan (JPM.N).

Technology and healthcare, which typically account for the largest share of the M&A market, have led the way again in 2021, in part thanks to pent-up demand last year when the pace of mergers and acquisitions fell to its lowest level in three years due to the global financial fallout from the COVID-19 pandemic.

Firms have rushed to raise funds from stock or bond offerings, large firms have taken advantage of booming stock markets to use their own stocks as an acquisition currency, while financial sponsors rushed to listed companies.

Additionally, strong corporate earnings and an overall favorable economic outlook have given business leaders the confidence to secure important and transformative deals, despite potential headwinds such as inflationary pressures.

“Strong stock markets are a key factor in mergers and acquisitions. When stock prices are high, it usually equates to a positive economic outlook and high CEO confidence, ”said Tom Miles, co-head of mergers and acquisitions for the Americas at Morgan Stanley (MS.N).

The overall volume of transactions in the United States nearly doubled to $ 2.61 trillion in 2021, according to Dealogic. Transactions in Europe jumped 47% to $ 1.26 trillion, while Asia-Pacific rose 37% to $ 1.27 trillion.

“While China’s cross-border activity has been modest, companies in other Asian countries have stepped up their purchases of global assets. We expect this trend to continue, especially for transactions in Europe and the United States. United States, “said Raghav Maliah, director of Goldman Sachs. (GS.N) Global Vice President of Investment Banking.

A number of the biggest deals of the year – AT&T Inc’s (TN) $ 43 billion deal with Discovery Inc (DISCA.O) and Medline Industries Inc’s $ 34 billion leveraged buyout – were announced during the first half of the year.[nL3N2N4326}knowmore[nL3N2N4326}readmore[nL3N2N4326}ensavoirplus[nL3N2N4326}readmore

But the pace of negotiations showed no sign of slowing down in the second half.

On November 21, KKR (KKR.N) made an offer for Italy’s largest telecommunications operator, Telecom Italia (TLIT.MI), valuing it at around $ 40 billion, including net debt in this which would be the largest private equity buyout ever in Europe should go ahead, and the second in the world. Read more

The easy availability of financing has led to private equity deals, with volumes more than doubling from last year to a record $ 985.2 billion, according to Dealogic.

“Investors are deploying liquidity at an unprecedented rate, which means that, on a global basis, asset valuations have reached historic levels,” said Luigi de Vecchi, chairman of the banking capital markets board for the ‘Europe, the Middle East and Africa at Citigroup (CN).

“The question is whether the prices paid now will continue to make sense over time.”

Pressed to make their businesses greener and more climate-friendly, business leaders looked for targets with the right climate references.

“With technology and digital transformation, sustainability is here to stay and is a key goal for most boards,” said Citi’s de Vecchi.

For an interactive graphic, click here: https://tmsnrt.rs/329m9We

BUMPER PAY DAY

After a year of lockdown, Wall Street’s major investment banks pushed their negotiators to meet more clients in person to win lucrative mandates to merge companies or defend them against raids by activist investors.

“This year we are expected to exceed $ 100 billion in global investment banking fees,” said Berthold Fuerst, Deutsche Bank’s global co-head of mergers and acquisitions (DBKGn.DE).

“There has been unprecedented demand for almost all investment banking products,” he said.

After the record year, bankers are now anticipating an exceptional bonus round in early 2022.

Dismantling business empires and conglomerates has also proven to be a lucrative business for investment banks.

In the second half of the year, General Electric, Johnson & Johnson (JNJ.N) and Toshiba (6502.T) were among large companies that announced plans to split their core businesses and separate several units. Read more

The dealflow shows no signs of slowing down as businesses and investors rush to sign deals ahead of possible interest rate hikes.

Borrowing costs are widely expected to rise over the next few months, with the US Federal Reserve indicating it will hike rates next year to tackle soaring inflation. Nonetheless, bankers expect trading activity to remain robust.

“I don’t think the upward movement in interest rates alone is going to be the catalyst that hijacks the M&A market,” said Miles of Morgan Stanley.

Senior business advisers are concerned about the fallout from the increasingly contradictory position of the United States Federal Trade Commission (FTC) on merger activity over the past year, with the proposed Nvidia’s $ 40 billion buyout from British chip designer Arm among the latest deals it is trying to block. Read more

“The FTC and the Justice Department are already taking longer than ever to assess deals, so companies pursuing mergers and acquisitions should be prepared to discuss their deals with regulators at any time,” Krishna Veeraraghavan said. , partner in mergers and acquisitions of a law firm. Paul, Weiss, Rifkind, Wharton & Garrison LLP.

He added that companies would have to wait longer to strike deals – up to a year and a half versus the usual 6 to 12 months – and should embark on a “willing to litigate” merger.

Despite all the headwinds, the coming year still offers plenty of opportunities as the Special Purpose Acquisition Company (SPAC) market has recently reopened, with new listings in Europe, after going through regulatory scrutiny by United States.

“With private equity and dry powder in the PSPC world, we expect the momentum to continue through 2022,” said Philipp Beck, head of EMEA mergers and acquisitions at UBS (UBSG.S).

Reporting by Anirban Sen in Bengaluru, Pamela Barbaglia in London and Kane Wu in Hong Kong; Editing by Kirsten Donovan

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