Private equity dealmaking reached historic heights in 2021. Building on a strong rebound in the second half of 2020, private equity set new annual records in global deal volume and transaction value. With private equity funds sitting on an estimated $2.3 trillion of dry powder and prominent firms raising funds of unprecedented size, capital supply is robust and continues to grow. However, changes to monetary policy, a shifting regulatory landscape, increased focus on EESG (employee, environmental, social and governance) and the possibility of tax reform on the horizon are likely to raise headwinds for private equity dealmakers in 2022 and beyond.
We review below some of the key themes that drove private equity deal activity in 2021 and our expectations for 2022.
Record Buyout Activity; Record Exit Activity. As we described in our recent post, Mergers and Acquisitions: 2022, private equity was a key driver behind the record-setting levels of overall M&A activity in 2021. Global private equity transaction volume ended the year at approximately $1.2 trillion, representing approximately 20% of overall global M&A volume and an approximately 111% increase over 2020. The increased activity levels primarily resulted from a record volume of buyout activity, driven by a plentiful capital supply, easy access to debt financing with low interest rates and favorable terms, as well as the deployment of massive amounts of cash that private equity firms had been amassing in recent years. Private equity firms also exited their investments at a record pace in 2021, with 3,895 exits with a total deal value of approximately $665 billion, surpassing 2020’s 2,594 exits totaling $521 billion.
