PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for 2022.
Deal volume continued to be high during the first three quarters of the year, totalling about 1,600 deals — more than in all of 2020. The deal pace remained robust in the fourth quarter of 2021 (from October 1 to November 11), totaling 149 deals. Deal value for the tech sector in 2021 was $293.2 billion, with $70.5 billion, $102.3 billion, $78.8 billion and $41.7 billion in the first, second, third and fourth quarters, respectively. The increase in overall deal value in 2021 compared to 2020 is partly due to the number of megadeals, up from 10 in 2020 to 19 in 2021. With a combined value of approximately $180 billion, megadeals made up about 60% of total deal value.
With nearly half of the fourth quarter to go, overall deals activity in 2021 is up 30% year over year, setting a brisk pace moving into 2022. The tech sector continues to provide compelling differentiation to buyers in other industries, which we expect to propel tech M&A in the year ahead. An extended rally in the stock market and lofty valuations has not dampened tech sector M&A activity (data for fourth quarter is partial).
Private equity continues to invest heavily in the tech sector, as indicated by the $78.8 billion in the third quarter of 2021, a large sequential increase over the $68.5 billion in the third quarter of 2020.
However, risks remain: Looming regulatory scrutiny and the potential for government intervention may soften deal activity in 2022. More potential legislation is coming — coupled with larger budgets for agencies to enforce antitrust laws — and that could impact M&A activity significantly.
“Deals activity in the tech sector continued at a frenetic pace in the second half of 2021. We expect this momentum to carry into 2022 fueled by ample corporate and private equity balance sheets, ‘ticking clocks’ in the SPAC market and divestitures as a result of antitrust and activist scrutiny, as well increased M&A activity, particularly in content, crypto, digital assets and anything ‘-tech’.”