PE share of global M&A value surges amid record capital raised

Private equity is now responsible for almost half of global deals according to new report from PwC

PE share of global M&A value surges amid record capital raised
Steve Randall

The first half of 2022 has seen global mergers and acquisitions activity return to pre-pandemic levels and private equity (PE) is a major driving force.

According to a new report from PwC, there were around 25,000 deals in the first six months of the year, down from the record-breaking levels of 2021.

The role of PE is clear, accounting for almost half of the US$2 trillion deal value so far in 2022, double the level from just five years ago as capital raised for investment reached a record $2.3 trillion.

That puts the amount of dry powder available for deals at three times the level that was around at the start of the financial crisis more than a decade ago.

Will Jackson-Moore, global private equity, real assets and sovereign funds leader, and partner at PwC UK, stressed that it’s not all plain sailing for PE in uncertain times.

“PE firms face challenges from rising costs and interest rates, contracting public market multiples and falling consumer confidence,” he said. “PEs will need to focus on ever more sophisticated value creation strategies such as digital transformation and cloud re-platforming along with a laser-like focus on dealing with inflationary cost increases to generate returns.”

Healthy returns

Across the M&A landscape, there was a decline in mega-deals ($5bn+) in the first half of 2022, but there were four with deal values in excess of US$50bn, compared to just one deal in the whole of 2021.

Technology, media and telecommunications sector deals accounted for over one third of deal value.

Lower valuations are expected to bring better opportunities for dealmakers to generate healthy returns.

This has been evidenced by recent public-to-private transactions which increased by more than 50% in 2022 compared to the prior-year period.

As well as inflation, requiring a wider lens for due diligence by dealmakers, the focus on ESG, supply chain resilience, portfolio optimisation, and digitalised business models, will remain sharp.

“Now is not the time to sit on the sidelines, but to reassess – even reset – M&A strategy,” commented Brian Levy, global deals industries leader, and partner, PwC US. “I fully expect to look back at 2022 as a pivotal moment where the successful dealmakers of tomorrow are determined by those who boldly execute on their M&A goals today.”