Dealmaking went into overdrive this year.

The tech sector dominated when it came to dealmaking, and some were huge. Microsoft acquired Nuance, a cloud and AI software company mainly working in the health sector, for $19.7 billion. And Autodesk bought Innovyze, a water infrastructure software company, for $1 billion.

In fact, 2021 saw the most announcements of U.S. megadeals— transactions of at least $5 billion—ever, according to a new PwC report. However, there was also a significant increase in volume among “not-quite-mega” deals. “Compared with a typical year of about 400 to 500 deals of $500 million to $5 billion in value, more than 900 such transactions were announced in 2021,” the report noted.

The red-hot M&A trend this year was propelled by access to capital. Will M&A acceleration continue or cool down in 2022? Experts shared their predictions.

“The asset management industry has set a torrid pace for M&A this year. Perhaps a little more subdued, we predict it will continue in 2022, although likely more global and less focused on cost-cutting.”

— AllianceBernstein CFO Ali Dibadj 

“The outlook is hugely bullish, hugely exciting for anyone who does M&A. No signs of a slow-down that we can see, at least for the next 12 months. [Inflation rates] shouldn’t impact the appetite for M&A. Obviously, the antitrust climate is something we’ll always watch. There’s been a lot of noise around big tech and media mergers in general. What we’re seeing is antitrust is not a concern and the actions have not been very different than what happened in the past. So, that really hasn’t been a barrier to most sectors.”

— EY Global Buy and Integrate Leader Brian Salsberg

“On the M&A front, we hope to see valuations become more rational as monetary policy is normalized and investors look past revenue growth to profits and cash flow delivery.”

—VISA CFO Vasant Prabhu 

Private equity’s continued role 

“If you’re looking at PE as a percentage of deal volume, in 2017 it was 24%. In 2019, it was 28%. And now in 2021, it’s 37%. This is regarding a PE platform deal, their first investment. If you were to add in the subsequent acquisitions, which are not counted in that 37%, we estimate that PEs are half of the M&A volume at this point. So, it’s an interesting trend … a pretty impressive part of the market.”

—Colin Wittmer, deals leader, PwC US

Momentum in tech

“There are vast parts of the economy that still needs to be digitized. You’re seeing this kind of rebalancing of supply chains. Due to geopolitics that’s driving M&A, underpinning all of that, you have this kind of acceleration of technological capability development that’s driven by the increased processing power revolution of 5G in digital. [Regarding] infrastructure that’s driving the software categories, think about cloud technologies and artificial intelligence. So, those are multi-year secular trends and those are tailwinds heading into 2022.”

—Barak Ravid, EY global technology, media and entertainment, telecommunications leader

“We see companies from traditionally non-tech, non-software spaces becoming more software enabled, sometimes organically, but very often through transformative acquisitions that allow them to change their business model … There’s more fuel and less friction in the velocity of the sector. (The software economy serves industries including health care, industrials, and transportation.)”

—Jeff Vogel, EY-Parthenon partner/principal and head of Software Strategy Group

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Big deal

Datasite, a software provider for financial transactions, surveyed 600 dealmakers in the U.S., U.K., and E.U. to gauge their thoughts on what's ahead for 2022. About 48% said they expect deal volume to climb higher. Despite increased antitrust scrutiny, 22% cited larger acquisitions as the top pick for M&A opportunities they expect to see most, ahead of joint ventures and partnerships (19%) and debt-like investments (16%).

Courtesy of Datasite

Going deeper

In a new opinion piece for Fortune, Todd Cipperman and Seth Linden advise leaders of emerging fintech companies not to emulate how Elon Musk communicates. "In their zeal to disrupt traditional finance, some fintechs have adopted the irreverent communications style of CEOs like Elon Musk–Time's Person of the Year," they write. "However, this approach may run afoul of regulatory authorities tasked with protecting investors and put fintech innovators at risk." Cipperman and Linden, compliance and communication experts, recommend that "fintechs adopt 'quality control' processes for their public utterances, and then abide by those self-imposed rules."

Leaderboard

Zrinka Dekic was named CFO, head of strategy and mergers and acquisitions at Genius Brands International, Inc. (NASDAQ: GNUS). The company also recently announced the acquisition of Canada’s WOW! Unlimited Media, Inc. Dekic brings nearly 20 years of entertainment industry and financial markets experience. At The Walt Disney Company, she held posts in corporate strategy, strategic planning and business development. Prior to joining Disney, Dekic served as a VP in the investment management division at Goldman Sachs in New York on the U.S. Fundamental Equity Portfolio Management team. Most recently, she served as VP of Houlihan Lokey’s Investment Banking Technology, Media & Telecom Group.

Randall “Randy” B. Gonzales was named CFO at Eos Energy Enterprises, Inc. (NASDAQ: EOSE), a provider of zinc-based energy storage systems. Gonzales will succeed Sagar Kurada, who has announced his intention to resign, effective Jan. 11, 2022. Gonzales previously served as EVP, CFO, and treasurer of Lydall, Inc. He also served as SVP, CFO, and treasurer of Caterpillar's Rail Division. Gonzales previously held financial and operational leadership roles within Nissan Motor Co., Ltd., where he spent almost six years at Nissan’s global headquarters in Japan.

Overheard

“I was wrong on this. I thought we would have been out of it past Labor Day and we’re not.”

—Morgan Stanley CEO James Gorman on comments he made in June that he'd be “very disappointed” if his employees hadn’t returned to the company's offices by Labor Day, as told to CNBC.