Deal value for the first half of 2022 was $272.4 billion, with $173.3 billion in the first quarter and $99.1 billion in the second quarter. The increase in overall deal value in the first half of 2022 compared to the first half of 2021 — $172.8 billion — is partly due to the number of megadeals. The first half of 2022 featured 14 megadeals, with a combined deal value of about $226.8 billion and more than 80% of total deal value. Deal volume was lower during the first two quarters of 2022, totalling 677 deals, compared with 1,070 deals for the first half of 2021.
Overall, deals activity in the first half of 2022 is down 37% year-over-year compared to the first half of 2021. The increasingly uncertain geopolitical and macroeconomic outlook has disproportionately impacted the public tech market. While tech buyers have significant dry powder and the lowering of valuations in the public markets should spur potential dealmaking, a similar adjustment is yet to trickle down into the private markets. Private equity players are also being increasingly cautious as interest rates rise. Specifically, the number of private equity acquirers decreased from about 85 firms to about 60 firms from the first half of 2021 to first half of 2022, respectively.
Deal value increased 58% between the first half of FY 2021 and FY 2022, driven by a handful of megadeals, with the top two being the acquisition of Activision Blizzard and Twitter for $68.7 billion and $44 billion, respectively. The average deal size jumped 30%, year over year, to $186 million, one of the highest levels in years. This activity underscores a trend of the large tech companies seeking bigger platforms that can offer consumers a broader suite of services. With the public stock market depressed, this also is a harbinger of more public-to-public deals to come in the second half of 2022.
Looking ahead at IPOs, we expect the public markets to be quiet through Labor Day. The markets will need a jump start from a market-making IPO with cash flow positive measures to revive activity for the technology, media and telecom (TMT) sector. From a SPAC perspective, the market has been buffeted by regulatory pressures. We expect to see a limited number of SPACs continue to bleed across the finish line in the remainder of 2022. Finally, we expect a lackluster IPO and SPAC market to spur M&A activity, as private equity and strategic buyers hunt for fallen unicorns and battered SPACs. We anticipate divestitures will gain momentum as companies seek liquidity and look to rationalize their portfolios.
M&A market fundamentals for the sector are favorable, given the critical business need to keep up with rapid technology innovation and transformation of businesses. In particular, software deal activity is expected to stay hot, with a focus on cloud, analytics, collaboration and security. See, for example, Broadcom’s recent $61 billion acquisition of VMware. While the ongoing tech market valuation correction increases uncertainty, it also creates opportunistic buying that could trigger a wave of tech M&A.
“While macroeconomic uncertainties pose a threat to dealmaking in the near term, more realistic valuations and a tepid IPO market coupled with strong cash positions of tech buyers will lead a bounce back in M&A.”