Download Our First Quarter 2022 Financing Update Here

Q1 capital market activity declined from the record-breaking levels of 2021 but was still historically high. In fact, PitchBook estimates that the first quarter may set a record in venture capital deal volume when factoring in deals that have not yet been reported.

Growth equity investments were strong, early-stage investments generally had a dip, and IPO markets decreased more significantly.

It has been well-known for a while that inflation was like to become a concern after the significant stimulus injected into the markets. However, the exacerbation of price increases by a variety of factors, including the Russia-Ukraine crisis, contributed to the potential market slowdown and volatility.
It should be emphasized that investors are still flush with cash. Even if the final figures for Q1 do not exceed 2021 levels, the quarter’s deal volume was higher than the individual quarters of 2020 and prior years.

With the Federal Reserve on track to raise its key interest rate a further six times in 2022, we will closely monitor how borrowing costs impact financing activity – particularly valuations. We also anticipate that we may see a shifting of investment activity between sectors as some become more out-of-favor while others become increasingly attractive.

As always, contact us if you would like to receive information about activity in your specific industry or geography, or if you would like to discuss options for your business.

Download our First Quarter 2022 Mergers & Acquisition Update

M&A activity slowed in the first quarter, while valuations fell sharply.

The volume decrease was generally expected as the buyers and investors we spoke with in Q4 generally indicated that they were in a full court press to close deals by year-end and weren’t building as much of a pipeline for Q1. However, for large deals, it may have also been exacerbated by Russia’s invasion of Ukraine and inflation concerns.

The ongoing crisis has pushed commodity prices considerably higher. For example, wheat rose as much as 50%. The Federal Reserve is expected to make an additional six interest rate hikes after its first in March, which is expected to further slow investment.

Nonetheless, from a historical perspective, first quarter activity was still relatively strong. More than 4,700 companies exchanged hands with a total value of more than $600 billion. And we’d be remiss if we didn’t note that investors are still flush with cash.

Valuation levels overall fell sharply during Q1. While we anticipated a decline from historical highs, it was much sharper than expected. We anticipate that both deal volume and valuations may bounce back a bit in Q2 as buyers and investors have been replenishing their deal pipelines after the year-end rush.

We have weathered a few highly uncertain years now, with new challenges arising at the start of 2022. While current trends are slightly concerning for overall M&A opportunities, we continue to believe there is significant demand for strong companies with favorable growth prospects.

As always, contact us if you would like to receive information about activity in your specific industry or geography, or if you would like to discuss options for your business.

Download our Fourth Quarter 2021 Mergers & Acquisitions Update

2021 was a record year for mergers and acquisitions, rebounding from a year in which portions of the economy essentially came to a halt. The 2021 economy was characterized by low borrowing costs, strong balance sheets, strong stock prices, and a surging economy, despite continued pressure from COVID-19, supply chain disruptions, and inflation concerns.​

The surging economy contributed to more than 18,500 deals crossing the finish line and more than $2.75 trillion in value consideration. Even the Midwest’s current-reported 148 deals is on pace to top the busiest quarter in five years.

Download our Third Quarter 2021 M&A Update Here
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M&A activity continues its record pace, supported by strong economic growth, borrower-friendly interest rates, and robust balance sheets. More than $1.8 trillion has been spent on North American M&A this year, topping $1.1 trillion and $1.6 trillion in the year-to-date periods of 2020 and 2019, respectively.
 
While these factors may continue to drive activity in the near-term, the Federal Reserve will likely raise interest rates to counter inflation, which may hamper activity down the road. This may impact valuations more than deal volume as an increasing number of Baby Boomers plan to retire.

Download our Third Quarter 2021 Financing Update here.
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Record fundraising and exit activity are providing a boon for record U.S. venture capital investment. In fact, more capital has been deployed in each successive quarter thus far in 2021, and total spend is nearly double so far this year over the first three quarters of 2020. It continues to be an optimal time for early-stage companies looking to raise cash.​
 
Private equity and other growth equity investment counts in the U.S. increased 45% compared to the same quarter of 2020, while deployed capital increased 9%.
 
Despite a dip in IPO activity, the market for IPOs is trending similarly to overall VC activity and is on pace for the best year since the tech-led boom of 2000. ​

​Download our Second Quarter 2021 M&A Update here. 
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The year is shaping up to be a great year for M&A activity, as a number of factors – strong economic growth, record government spending and stimulus, low borrowing rates, and easing inflation worries – are leading to record deal-making. Deal volume during the quarter was approximately double the volume in the second quarter of 2020, and year-to-date volume is 20% higher than the year-to-date period of 2019.  

Though there are risks to continued growth, we believe the market will remain strong in the short-term. In addition to the reasons above, the stock market continues to touch new highs, and executives continue to be optimistic. Risks to economic growth include restrictions related to the ongoing COVID-19 pandemic, a resurfacing of inflationary concerns, and any changes to the Federal Reserve’s existing policies.  

​According to preliminary data from PitchBook Data, there were 513 US mergers and acquisitions in November, accounting for approximately $57 billion in total consideration. As we noted in our October 2020 Highlights post, Bloomberg reported a substantial increase in M&A volume before the election; however, those deals were simply announcements and may take time to close.

​Supported by a more “open” economy and record fiscal stimulus, the economy rebounded sharply in the third quarter, and investing activity followed suit. The aggregate value of venture capital (VC) investment increased 11% year over year in the third quarter of 2020 to reach $38 billion. And we’re seeing similar trends in private equity (PE) with year-to-date investments trending 7% higher than the same periods of 2019.