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