M&A markets appeared to defy gravity through 2021. Globally, dealmakers were highly active, with values exceeding US$5 trillion for the first time ever. Total deal value rose by 81 percent on 2020 totals to US$5.75 trillion, with volumes rising 37 percent year-on-year to reach 26,060 deals.

And nowhere was busier than the US market. Surpassing all records, US dealmaking exceeded the US$2 trillion milestone for the first time, climbing to US$2.6 trillion—a massive 99 percent increase on 2020 total values. By volume, the US M&A market also smashed records, with 7,891 deals (versus the previous high of 6,497 transactions in 2018).

With stock markets trending higher through much of the year—the S&P 500 was up more than 26 percent for the year—public company financial firepower increased and dealmaker confidence ran high. Businesses seeking rapid growth and strategic shifts at a time of technological and societal change went on the hunt for large and potentially transformative deals to achieve these aims. Megadeals of US$5 billion or more accounted for nearly half of all US M&A.

And it wasn't just the public markets pushing up M&A numbers. Private equity activity was highly active in 2021, with deal value reaching US$987.8 billion—more than double the previous year's total of US$474.5 billion. Volume over this period rose by 59 percent to 3,460 transactions. With strong fundraising totals in 2020—even despite a brief COVID-induced lull—and a continuation of that trend through 2021, dry powder extended its climb, reaching US$2.3 trillion in August 2021, according to S&P Global. Combined with the ready availability of low-cost debt financing, private equity firms had significant capital at their disposal to close deals. The fifth-largest deal of the year, valued at US$34 billion, was a private equity consortium that saw The Carlyle Group, Hellman & Friedman, Blackstone Group, Abu Dhabi Investment Authority and GIC acquire Medline.

View full image: US M&A 2016 – 2021 (PDF)

View full image: US M&A: Domestic, inbound and outbound value (PDF)

View full image: US M&A value by deal size 2021 vs. 2020 (PDF)

View full image: Top-ten US M&A deals 2021 (PDF)

Domestic, inbound and outbound deals surge

Domestic transactions were particularly buoyant and accounted for much of the spectacular rise in activity. Totaling US$2.1 trillion, US-to-US transactions rose by 102 percent in 2021 versus the previous year.

The surge in domestic activity is partly the result of supply chain issues and the increased regulatory scrutiny of cross-border transactions. Since COVID-19 disrupted the production and flow of goods around the world, companies have begun to bring supply sources closer to home, boosting M&A in the process.

Rising concerns about the national security implications of deals involving data and other sensitive assets have also placed some roadblocks in the way of overseas investments. With the US taking a stronger stance on deals involving certain jurisdictions, getting some deals over the line has been challenging. At the same time, other countries in Europe and Asia-Pacific are also looking much more closely at overseas investments, potentially stemming the flow of cross-border deals overall.

However, even with a more cautious approach to cross-border deals, 2021 saw both inbound and outbound M&A increase. The value of US transactions involving overseas buyers rose by 90 percent over 2020 figures to US$483 billion, and those involving US buyers of foreign assets increased to US$817.8 billion—a 121 percent increase on the previous year.

Tech trends push up deal activity

Technology was by far the most active sector by value, chalking up US$790 billion worth of transactions, an increase of 133 percent on an already busy 2020, while volumes also rose, by 69 percent, to 2,194 deals.

The surge in US tech M&A is partly due to the strong technology base in the US. Technology assets are hotter than ever, as businesses rapidly digitalize their operations and deploy technologies such as machine learning and artificial intelligence, particularly since the pandemic.

Appetite for media and entertainment assets also surged due to the pandemic. Indeed, the biggest deal of the year hailed from the sector: the US$96.2 billion WarnerMedia and Discovery tie-up. This megadeal helped media M&A surge by 744 percent to US$182.9 billion compared to the previous year. Volume in the sector ticked up by 35 percent over the same period.

As we move into 2022, the signs are that many of the factors underpinning strong M&A markets are set to endure. The emergence of the highly transmissible Omicron variant of COVID-19 may cause some stock market volatility in the short term, while rising inflation and the prospect of interest rate rises are also potential risks. However, should these risks materialize, their effects will take some time to filter through to M&A activity. Absent a major shock, we anticipate continued robust M&A activity, at least through the first half of 2022.

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