2021 – An Exceptional year for M&A

Much has been written about the surge in M&A in 2021 and deal volumes in our market are up 35% as compared to 2020 (in transactions up to £1bn), with over 24,900 deals completed.  Of more significance, as our chart shows, is that they are up by 22% as compared to 2019.*

2019 vs. 2021 - deal volume and value % change

Volume / value percentage change calculated as January’19 vs. January‘21 with deal values less than £1bn

Deal activity increased in every sector except, unsurprisingly, Hospitality and Leisure – but it is a small sector, even in the best of times.

Technology led the way out of the 2020 slump and has continued its surge in 2021.  For the first time it became the most active sector with c.6,000 deals completed last year - an increase of more than 70% since 2019. 

The sector whose crown was snatched by Technology – Manufacturing and Automotive – also enjoyed a strong year.  Notwithstanding the much-publicised supply chain issues, deal volume was up 13% on 2019 and an exceptional 32% on 2020.

2021 – An Exceptional year for the Technology sector

The first of our ‘Big Stories’ is the dramatic increase in deal activity in the Technology sector.  Deal volumes are up by a staggering 77% compared to 2019 – and aggregate value by more than twice that level. There has been a sea change in investor attitudes towards the sector and it is now well understood that technology businesses offer not only non-cyclical growth opportunities, but also resilient business models.

In a world where we are all fearful about the medium-term economic outlook this looks like a compelling investment proposition – but at what price?

The answer is ‘a significant price’.  The data we have suggests that technology valuations are up by 50% compared to 2019. Though we recognise this is not a precise metric, as only c.40% of deal values are disclosed, it is however borne out by our deal experience.

This represents a classic outcome of supply and demand dynamics – the more attractive the sector, the more people want to invest, so the more they have to pay.  However, 50% of the investors in the Technology sector are Private Equity and their future returns are predicated on the new levels of valuation persisting - and we believe they will. 

We believe that the growth in technology markets will persist and that the strong underlying business models will drive resilience, cash generation and margins.  The threats to valuation will not be a downgrading of the sector but will more likely be situation-specific and relate to disruptive technologies or a lack of genuine sustainable competitive advantage.

We also believe that the levels of innovation and entrepreneurship in technology will drive market growth and ensure that investors are not short of businesses to support.

Private Equity remains happy to ‘go long’ technology and completed more than 3,200 deals in the sector in 2021, a 180% increase from 2019.   This trend leads us to our second ‘Big Story’ – the rise of Private Equity investment.

2021 - an Exceptional year for Private Equity

Our second ‘Big Story’ is the rise of Private Equity.  Commentators have long talked about the ‘wall’ of private capital available.   That ‘wall’ is now not just available, but being deployed.

In 2019, Private Equity completed just over 5,000 deals. In 2021, it was 9,300 – a 82% increase.  In the same period, corporate deals rose by just 2%.  In 2019, 25% of businesses were bought by Private Equity.  In 2021 it was 37%, an increase of 49% in only two years.

This trend is most clear in the United States where 50% of all businesses sold in 2021 were bought by Private Equity – a 46% increase on 2019.  Europe is the most active market with over 10,000 transactions and a similar increase to the United States.  But the largest market share increase has been in Asia and, with only 22% of businesses being acquired by Private Equity, we anticipate that Asia will demonstrate the strongest growth over the next few years.  Not only has more capital been allocated to the region from international and domestic funds, but corporates and founders in major markets like China, India and Japan are now much more prepared to sell to Private Equity.

% of businesses bought by Private Equity


No. deals

% of total

No. deals

% of total






United States















The Private Equity business model has been hugely successful for investors in the asset class, investee companies and of course, for Private Equity firms.  It has also delivered great returns for the debt providers and for those of us supplying services to the industry.  The business model works best when capital is deployed at pace and in increasing volume – attracting fees and creating the opportunity for successful realisations enabling new, and larger funds to be raised – and so the snowball of success grows. 

The flip side of the rise of Private Equity is the demise of corporate investors.  We do not think that this reflects a new world view or that M&A is now less important for corporates.  We think it reflects a shift in priorities for corporates over the last two years.  The most pressing issues for corporates have been related to the welfare of their staff and their relationships with their customers, as well as new operational challenges brought on by hybrid working and supply chain issues. As a consequence, M&A has been less ‘urgent’.  Corporates have stepped back from aggressive processes and let Private Equity prevail.

With the universal threat of inflation challenging organic growth, we are confident that they will be back. So, what does that mean for the year ahead?

2022 – An Exceptional Year?

We see no signs of a reduction in Private Equity enthusiasm to deploy capital and we predict the return of corporate M&A.  Surely that suggests a boom market for M&A?

Well, no assessment of the future can ignore the macro issues.  Notwithstanding the positive headlines around growth and employment, it is hard to ignore the troubling levels of inflation, government debt and concerns about economic cycles.

We witnessed Exceptional exuberance in 2021 and there is an unparalleled level of available capital, but most Private Equity investors are entering 2022 with an attitude that is somewhat risk averse. They are prepared to pay huge prices for Exceptional businesses but are much less willing to invest in anything less than Exceptional.  The owners of Exceptional businesses have, unsurprisingly, been enthusiastic sellers – given the market exuberance – and have frequently accelerated their exits.  Consequently, we anticipate that there will be fewer such businesses coming to market in 2022.

Indeed, we have already seen the beginnings of a slowdown in activity over the last quarter:


Deal volume

Q1 2021


Q2 2021


Q3 2021


Q4 2021


This slowdown is unusual but is it Exceptional?  Q4 is customarily the most active period – as it has been in every year since 2014.  If the reduced pace set in Q4 2021 continues in 2022, levels of M&A would approximate the activity seen in 2019.    

Many of the businesses gearing up to come to the market in the first half of 2022 have performed well – but not Exceptionally.  In contrast to the acceleration of Exceptional transactions in 2021, many of these businesses have delayed their exits.  And so, there is a pent-up supply of such transactions.  We therefore believe the reduced supply of Exceptional businesses coming to market will be mitigated by transactions that have been waiting to launch.

We anticipate that the processes for these businesses will be less febrile and exuberant, and will instead take more time.  This change will enable corporate buyers to compete more effectively.  With a shift in priorities, they will be in a better position to assess the strategic fit and to consider synergies.  At the same time, Private Equity will need more time to assess the greater risks these businesses face and to reflect those in valuation.

Taking this into consideration and reflecting on the macro-economic issues, we anticipate somewhat reduced activity from the Exceptional level of 2021 – but still a stronger year than 2019.  We also predict a re-balancing in favour of sectors other than technology. Furthermore, whilst we expect something of a comeback from corporate buyers, we believe that Private Equity will continue to hold most of its Exceptional market share.

2022…and beyond

The shift from corporate investors, who buy businesses to hold and develop, towards Private Equity, who buy businesses to grow and sell, underwrites the prospects for M&A markets for many years to come.  Whilst it is inevitable that macro-economic issues will always disrupt levels of M&A in any period, at some stage more businesses will be looking for more capital and new investors than ever before.  This trend is already clear and has led to significant innovation as new buyer groups emerge, be it SPACs or continuation funds, and to changes in the shape of the Private Equity industry as General Partners extend their investment remits and assets under management, and list themselves on public markets. 


The stock of future opportunities for M&A is being built now.  The capital to commit to those opportunities is being raised now.  We remain excited about the long-term prospects for our industry and optimistic about the year ahead.

Predicting future activity is an art and not a science and this analysis is not scientific. It is informed judgement – much like the best M&A advice.

*All data included in this report was sourced from Mergermarket
Dataset for each time frame outlined, comprises all reported acquisitions with deal values less than £1bn, including those with undisclosed values, across all sectors and geographies

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DC Advisory's 2021 Global Deals Round-Up 

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