With $35 billion flowing into start-ups, total deals soar 40% to record $115 billion in 2021: Report

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Led by a 50 percent jump in private equity funding to an all-time of over $66 billion, the overall deal activity soared nearly 40 percent to reach about $115 billion in 2021 across 2,064 transactions, according to a report that expects the momentum to continue this year. The Deal Street was boosted by a 50 per cent jump in private equity (PE) deals in value terms to $66.1 billion, an all-time high in 2021 across 1,258 deals, which is 32 per cent higher in volume compared with 2020, according to data compiled by PwC India.

Of the total PE money, as much as $35 billion were pumped into start-ups alone, the report added. Despite the headwinds from the pandemic and other looming uncertainties, the deal activity saw a record high in 2021 and surpassed pre-COVID-19 levels. The deal activity reached $114.9 billion with 2,064 transactions, a 40 per cent increase from 2020 in terms of value and 60 per cent in terms of volume, PwC said.

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The record buoyancy in the deal activity was driven by abundant cash reserves, availability of private equity dry powder, foreign direct investments and lower interest rates, it said. Of the total, PE deals contributed 57 per cent by value and 61 per cent by volume, while mergers and acquisitions (M&As) contributed the remaining 43 per cent by value and 39 per cent by volume, it said.

The country also saw record 43 start-ups turning into unicorns in 2021. Start-ups had a blockbuster with around $35 billion raised across more than 1,000 rounds, a three times increase compared to 2020 and largely driven by fintech, edutech and software-as-a-service (SaaS). PwC India Partner and Leader (Deals) Dinesh Arora said that despite headwinds from the pandemic and other uncertainties, chief executive officers are significantly optimistic about the prospects for a stronger economy in the coming year.

"We, therefore, expect the deal momentum to continue in 2022, as we see a strategic shift taking place at the corporate side to digital and new disruptive business models driving M&A decision-making," Arora said. M&A volumes more than doubled in 2021 and 28 per cent in value over 2020 led by megadeals in renewables, infrastructure and education.

The technology sector continues to dominate the PE investment landscape and the year gone by saw 823 deals totalling $40 billion, around five times of 2020. This sharp increase is primarily owing to large deal size $5 billion deals totalled $12.1 billion and there were 78 mid-sized deals involving $100-1,000 million totalled $19.4 billion, compared to just 19 in 2020.

As more PE money poured in, there was also a major increase in their exits — over six times the exit value in 2020, led by strategic sales which accounted for 36 per cent of the exit value in 2021.