EMEA M&A markets went into overdrive in 2021, spurred by a number of factors. The economic restart underpinned investor confidence to get back in the game. Piles of private equity dry powder sitting in reserve meant funds had to hunt for assets. Simultaneously, corporates have been under pressure to transact, raising cash to pay down debt secured during the first year of the pandemic, and repurposing their portfolios to future-proof their offerings.
This pent-up demand saw M&A in EMEA reach a new peak in 2021. Total value came to €1.37tn across the year—a 74% increase on the previous year and the highest annual total on Mergermarket record. Volume, meanwhile, increased 43% yoy to 11,007 transactions— another annual record.
PE especially buoyant
Private equity activity was especially buoyant, with buyout value surging 116% yoy to €423bn, while volume rose by 60% to 2,530 transactions. Funds weren’t only acquisitive; the rebound in economic demand and the backdrop of rising stock markets supported valuation multiples, allowing PE funds to liquidate existing holdings. Exit value increased by 49% annually, to €265bn, and volume by 58% to 1,368 deals.
TMT most active
The largest PE deal of the year is potentially one for the history books. KKR offered €35.5bn for Telecom Italia (TIM) in November, the deal pending approval not only from the customary regulators but also from the Italian government, which has the power to block the deal on the basis of national interest. If it goes through, it will be the largest European buyout on record, as TIM is Europe’s sixth-largest telco.
Bumper deals in the telecoms and internet space such as this helped TMT to snatch the crown—the sector dominating by both value and volume. Total value reached €352.5bn—not only was this the highest of any sector in 2021, as well as the highest annual total for any sector in Europe on record. Volume also rose significantly, up 60% to 2,743 deals.
Connectivity continues to be a major investment theme. There are some encouraging signs that the worst of the pandemic may be behind us, but even so, trends like the adoption of e-commerce and hybrid work are set to continue to grow.
However, while 2021 was an exceptional year for M&A, there was some weakening of momentum in the final quarter measured by deal volume, activity slipping to levels not seen since Q3 2020. But many of the fundamentals for 2022 are strong.
The pandemic is showing signs of moving in a positive direction. If future variants continue to cause milder illness, the crisis is likely to be easier to manage and will be an accepted reality, hopefully fading into the background.
Companies also still need to make acquisitions for growth, and divestments to raise cash. And there are unprecedented levels of investor capital sitting in both private equity funds and special purpose acquisition companies (SPACs). Corporates, too, will be able to easily fund M&A deals. As we look ahead to 2022, these sources of dry powder will ensure strong buy-side demand.
The recovery is still in a relatively early stage and eyes have been fixed on inflation rates and supply chain complications as potential challenges. Provided the recovery continues as it has, however, there is plenty to be optimistic about for the 12 months ahead.
Read more, including how specific sectors fared, here.