: M&A activity cooled in the fourth quarter — but it still topped $1 trillion

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Global merger & acquisition activity cooled by 14.5% in the fourth quarter over the year-ago period, but it still remained above $1 trillion for a fifth consecutive quarter as bullish stock prices and low-cost credit fueled deal making, according to S&P Global Market Intelligence.

Global M&A volume totaled just over $1 trillion via 13,890 deals in the quarter, down from $1.17 trillion via 15,345 transactions in the year-ago quarter.

For all of 2021, global M&A volume rose to $4.55 trillion via 56,686 deals, up from $2.98 trillion and 47,433 deals in 2020.

In the U.S., M&A deal-making fell to $476.4 billion via 5,792 transactions in the period, from $586.9 billion in volume from 5,385 transactions in the year-ago quarter. For full year 2021, U.S. M&A volume increased to $2.3 trillion with 21,994 transactions, up from $1.28 trillion in dollar activity via 16,723 deals in 2020 and ahead of the $1.64 trillion in combined value via 19,041 deals in 2019.

“Accommodative financing markets have helped fuel large M&A transactions, with low interest rates on debt financing and open capital markets giving buyers the wherewithal to execute large deals,” S&P analysts Joe Mantone and Gaurang Dholakia said in their Q4 M&A and Equity Offerings Market Report, which was released to clients on Wednesday.

Looking ahead, the Federal Reserve’s efforts to raise interest rates to combat inflation in the U.S. market “could slow M&A activity” as higher interest rates raise the cost of deal financing, Mantone and Dholakia said.

“The IPO and M&A deal-making activity in 2021 will prove challenging to beat in 2022,” they said.

Stock market volatility in 2022 amid Russia’s invasion of Ukraine and jitters around inflation is making the IPO market less attractive, and leaves buyers with weaker currency for acquisitions, they noted.

Nevertheless, many of the same themes that motivated dealmakers in 2021 remain in the market, including trillions in dry powder for deals held by private equity firms, and special purpose acquisition companies looking to acquire businesses.

Consolidation in the technology, media and telecom industries persists as a major theme, after the sector rang up the most U.S. deal volume out of eight industry groups tracked by S&P with $100.7 billion in deals in the fourth quarter.

Oracle Corp’s
ORCL,
+4.58%
$29.35 billion acquisition of Cerner Corp.
CERN,
+0.04%
marked the largest U.S. M&A deal announcement in the fourth quarter, followed by the $20 billion purchase of McAfee Corp. by a consortium including Advent International Corp. and the $17 billion acquisition of Athenahealth Inc. by GIC Pvt. Ltd, Bain Capital Private Equity LP, Hellman & Friedman LLC and Abu Dhabi Investment Authority.

The $13.7 billion initial public offering of Rivian Automotive Inc.
RIVN,
+5.16%
ranked as the largest U.S. IPO in the fourth quarter, followed by a $2.59 billion IPO for Global Foundries Inc.
GFS,
+3.26%
and the $1.29 billion IPO for Hertz Global Holdings Inc.
HTZ,
+9.20%.