PE Megadeals Set To Rise In 2022 As Buyout Houses Help Global M&A Thrive: PitchBook

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Private equity dealmaking hit an all-time high in 2021, and signals point to an equally active 2022 according to a new report from PitchBook.

The firm’s latest Global M&A report highlighted the key role massive private equity dealmaking was having on global markets – and said that with PE firms expected to amass more capital in $5bn-plus funds than ever in 2022, these megadeals could become more regular.

It picked out the $17bn Athenahealth and $34bn MedLine deals as prime examples of the return of huge private equity consortium buyouts, despite ongoing uncertainty around the Covid-19 pandemic.

In Europe it pointed to the €10bn-plus buyout offer forTelecom Italia, and Bain Capital and CVC expected to bid on Walgreens’ carveout of UK-based Boots, as evidence it was not just a North American phenomenon.

PitchBook said, “Global M&A thrived in 2021 as deal activity rebounded from the COVID-19-induced slowdown in 2020 and blew past previous record levels.

“The unprecedented depth, breadth, and velocity of the deal market led deals across all sectors, sizes, transaction types, and geographies to have healthy showings. The rebound endured through most of the year, despite several new Covid-19 variants popping up. Vaccination rates across the globe—and transitioning from a pandemic to an endemic mindset— offer a more stable outlook, which is bullish for deal flow.

“With a more normalized economic environment, cross-border deal activity finally re-emerged. Much of it was regional, but as the US lifted travel restrictions, transatlantic deal activity also surged back to life.

“Healthy returns from public markets undergirded a more favorable M&A environment as well.”

PitchBook pointed to the tech sector as having reaped the benefits of strong private equity balance sheets, with IT M&A hitting a record 6,453 deals at a cumulative value of about $896bn.

It said PE and corporate buyers used tech M&A to keep up with the rapid pace of digitization across industries, and to differentiate themselves with tech capabilities. While

But the report addded that while IT enjoyed high valuations in recent years, higher interest rates may dampen multiples, which are often discounted far into the future. In recent months high-growth tech shares have started to underperform, with markets pricing in multiple interest rate hikes from the Fed in 2022.

It said, “Any downturn in public tech shares is likely to bea leading indicator of lower IPO and M&A activity and thus bears watching.”

Source: https://www.altassets.net/knowledge-bank/by-pe-focus/large-buyouts/100183330.html

Time Stamp: January 28, 2022