M&A Quarterly Review—1st Quarter 2022
Middle market M&A continued to soar in Q4 2021
- Deal volume rose 23% to 15,197 during the TTM ended December 2021
- Total deal value ballooned 56% to $432 billion during the same period
- Valuation multiples jumped to 7.3x TTM adjusted EBITDA in 2021, establishing a new, multi-year high
The market remains awash in debt and equity
- Total leveraged loan issuance in the U.S. reached a record $798 billion in 2021
- S&P 500 companies are sitting on an estimated $3.8 trillion in cash and equivalents
- Globally, PE firms held $1.32 trillion in dry powder as of September 2021
The economic recovery regained momentum, but inflation remains a key concern
- GDP growth accelerated to 6.9% in Q4 2021 and 5.7% for the full year 2021
- The LEI slipped for the first time in 11 months in January due to inflation and other concerns
- Consumer confidence weakened marginally to 110.5, slowed by headwinds related to inflation
The fundamentals that made 2021 so strong continue in 2022
- Corporations are pursuing strategic mergers and acquisitions to accelerate growth
- Sponsors are taking profits and corporations are using divestitures and spinoffs to focus strategically
- Private equity groups are motivated to put capital to work
Risks to our view
- Rising inflation leads to materially higher interest rates and lower valuations
- Supply chain issues, which appear to be easing, linger on or worsen
- Russia’s invasion of Ukraine will exacerbate inflation and supply chain constraints and cause other structural shifts
