In record M&A year, first trillion-dollar year for private equity within sight

As of the third quarter, private-equity firms had disclosed $868 billion in deals, topping the high-water mark of 2006-07 when PE firms collectively announced more than $750 billion in deals, according to Ernst & Young LLP.

And with plenty of “dry powder"—money that investors pledge—there is no sign of cooling off, said Chris Smyth, EY Americas private equity leader.

Technology has been the unquestionable leader, accounting for more than 30% of deal volume and value for the first nine months of the year, said Mr. Smyth.

“I’ve had a number of funds that maybe have not played in technology in the past, and what they’re telling me now is, ‘We can’t afford not to be in technology because of this aspect of how technology is impacting every other sector,’ " he said.

Mr. Smyth pointed to tech activity in the industrial sectors and the supply chain, for example, leveraging data to figure out where warehouses should be located and manufacturing footprints.

“These are not problems that you can solve in a quarter. These are multiyear journeys," he said.

Healthcare, the second-largest sector with more than 10% of deal volume for the first nine months, is also an area of continued growth, particularly in the U.S., Mr. Smyth said.

Beyond record levels of so-called dry powder, there is actually more money available as limited partners look for direct investment opportunities, Mr. Smyth said.

Those levels of cash are driving so-called megadeals, valued at $10 billion or more. Also back: club deals, investment consortia like the one that bought a majority stake in Medline Industries Inc. in one of the largest leveraged buyouts since the financial crisis.

About $140 billion in club deals were announced in the first half of 2021, the most since 2007, according to EY.