Adam O. Emmerich and Robin Panovka are partners at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell memorandum by Mr. Emmerich, Mr. Panovka, Jodi J. Schwartz, David A. Katz, Ilene Knable Gotts, and Andrew J. Nussbaum. Related research from the Program on Corporate Governance includes Are M&A Contract Clauses Value Relevant to Target and Bidder Shareholders? by John C. Coates, Darius Palia, and Ge Wu (discussed on the Forum here); and The New Look of Deal Protection by Fernan Restrepo and Guhan Subramanian (discussed on the Forum here).
2021 was the most active year for M&A on record. There can be no other headline for the relentless boom in M&A over the twelve months ended December 31, 2021, during which global M&A volume exceeded $5.8 trillion, the highest annual volume on record. Each of the four quarters of 2021 placed in the top six most active quarters in global M&A by volume since the beginning of 2010. As always, however, the headline figures do not tell the whole story, as M&A in 2021 was not only historically robust, but also as complex and multi-faceted as ever.
Record-breaking M&A volume in 2021 was driven by a surge in large deals of $1 billion to $10 billion. There was $2.8 trillion in large deals in 2021, an 81% increase relative to the volume of such deals in 2020 ($1.5 trillion) and a virtual doubling relative to 2019 ($1.4 trillion), the last full year prior to the onset of the Covid-19 pandemic. Private equity buyers, and their “dry-powder” in need of deployment, participated in the large deal boom in a significant way, with $1.3 trillion in large buyouts in 2021, increases of 114% and 162% relative to volumes in 2020 and 2019 ($589 billion and $479 billion, in aggregate value in 2020 and 2019, respectively).
At the same time, while mega-mergers were more abundant in 2021 than in 2020, the largest deals in 2021 were not as large as in prior years. There were 16 transactions in excess of $20 billion in 2021, totalling $565 billion (an average deal size of $35 billion), compared to 12 such transactions in 2020, totalling $498 billion (an average deal size of $41 billion), and 20 such transactions in 2019, totalling $900 billion (an average deal size of $45 billion). While some industry observers have suggested that dealmakers’ uncertainty as to the approach of the new antitrust regime in the United States (headwinds that do not blow as strongly against private equity) put the very largest deals on hold, there are signs of increasing confidence in strategic tie-ups, including Oracle’s $28.3 billion acquisition of Cerner announced at the end of December.
