The boom in the number of M&A deals in 2021 was unprecedented—far higher than in any period in the past 126 years (chart 1). The question now is, what caused this surge and will it continue in 2022? While there are still a large number of factors that will likely sustain M&A in 2022, there are also some significant downside risks, including the potential for continued elevated market volatility as fiscal and monetary policy support is removed, flaring geopolitical tensions in the Ukraine, and the threat posed by increased government regulation.
Both the structural and near-term cyclical trends in M&A are the topic of this Economics Weekly, with the view that activity is likely to remain robust, though we will not see a repeat of 2021’s level of activity, and risks are tilted to the downside.
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Richard de Chazal, CFA, is a London-based macroeconomist covering the U.S. economy and financial markets.