Generally speaking, mergers and acquisitions (M&As) are most common in the technology, healthcare, financial services, and retail sectors. Nearly every industry had record activity in 2021, though. With just a few exceptions, the M&A boom swept across the US economy with deal values up significantly from 2020 totals. In this article, we will take a closer look at the sectors indicating growth for best-selling businesses.
Technology
Even with 2021’s widespread increase in activity across industries, the technology sector continued to dominate, setting records for volume and value. In 2021, there were 2,193 technology deals, up sixty-nine percent (69%) from 2020, while value numbers rose one hundred and thirty-three percent (133%).
The technology industry changes so rapidly that if companies hope to remain relevant, they need a huge financial backing and massive presence. Any time a new product or idea comes out, tech industry giants like Meta (formerly Facebook), Microsoft, and Google have the funds to perfect the idea or product and then bring it to market. So, smaller companies often opt to join forces with the giants rather than trying to compete.
Industrials & Chemicals
The second-largest sector by value and by volume in 2021 M&A activity was industrials and chemicals. This sector saw an increase of one hundred and eleven percent (111%) in deal value over 2020, and the volume of deals rose by thirty-one percent (31%). This represents a marked rebound for an industry that largely had to shut down for a time due to 2020’s stay-at-home orders.
Increased M&A in this sector may reflect a desire by companies to bring at least part of their supply chain closer in light of ongoing pandemic-related disruptions. It stands to reason that some of the best-selling businesses will be those among commercial services and producer manufacturing. Consider the following data from just Q4 2021, which shows various parts of this sector near the top of M&A activity by volume.
Number of M&A deals in the United States in Q4 2021, by industry:
Healthcare
Like technology, a rapidly changing landscape in the healthcare industry poses difficulties for small and medium companies that lack the capital to keep up with larger, better-funded companies. Additionally, the continual rise in healthcare costs adds even more difficulty for companies trying to compete. For many, the best option is to be acquired. Unsurprisingly, 2021’s M&A activity saw the healthcare sector near the top with pharma, medical, and biotechnology coming in third by value [up thirty-eight percent (38%) from 2020], with a twenty-five percent (25%) rise in volume.
Finance
Financial services and real estate also saw significant increases in deal values in 2021. Economic turmoil throughout the 21st century has led to constant M&A activity in the financial services industry. Most notably, firms that managed to weather the financial crisis of 2007-2009 have rescued struggling competitors by acquiring them, with the government overseeing and assisting in the process in some cases.
This consolidation of the banking industry continued through 2021, although the impact of the COVID-19 pandemic caused the volume of bank mergers to fall significantly.1 Even so, the largest companies in this sector maintain enough market capitalization for significant leverage to acquire regional banks and trusts.
Retail
Lastly, let’s discuss retail, another market sector where mergers and acquisitions are most common. The cyclical nature of retail can often present cash flow difficulties for companies, making them some of the best selling businesses as they are well-positioned for acquisition by more solvent companies in the sector. Companies that manage to sustain good cash flow through a downturn find themselves in a position to acquire competitors that were unable to stay afloat. This is why we see much of the M&A activity in the retail sector taking place during dips in the economy.
Interestingly though, retail was one of a few sectors that actually recorded lower transaction value in 2021 compared to 2020. Retail deals fell from $35 billion to $33.6 billion. This reflects the challenging environment that brick-and-mortar stores face as shoppers migrate online. As we progress through 2022, we may see an uptick in M&A activity in the retail sector as retailers need to further consolidate.
If you are considering selling your business, regardless of industry, contact Viking today for a confidential, no-obligation consultation. With decades of experience in buying and selling businesses in a wide range of industries, Viking M&A is here to help.
- Record Breaker: US M&A 2021 (Accessed March 2022)
- Sector overview: Strong M&A activity pervades nearly every sector (Accessed March 2022)
- Industries Where Mergers and Acquisitions Are Most Common (Accessed March 2022)
- Record Breaker: US M&A 2021 (Accessed March 2022)
- Industries Where Mergers and Acquisitions Are Most Common (Accessed March 2022)
- Sector overview: Strong M&A activity pervades nearly every sector (Accessed March 2022)
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