Compelling signals from a recovering M&A market

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The question at the end of 2020 was whether the strong recovery in M&A activity could be sustained in 2021.

Evidence from the first quarter data looks remarkably positive overall. By deal value, this is the strongest Q1 worldwide in 10 years. But there is still a way to go.

Deal value has shown strong growth, up by 93%. Deal volume, too, has grown, albeit by a more muted 6%. The number of deals is up in most regions and sectors, with only a few notable exceptions.

The continuing recovery in transaction value has been helped by the return of big transactions.

Deals over USD5bn

have grown in value and volume, by 92% and 133%, respectively, and account for 37% of total M&A activity.

Deals over USD10bn

have rebounded by 37% in value and 50% by number of deals, accounting for 17% of total M&A activity.

Acquisitions with a public target are another area of the market where both value and volume are climbing, up by 88% and 12% respectively.

There has been a 76% growth in the value of domestic deals. But there has been an even sharper increase in the value of crossborder deals, up by a robust 135%, in spite of the fact this is a category that had been under pressure for some time.

Global M&A Q1 2021 snapshot

logo for data source company Data provided by Refinitiv. Note: Figures represent deals announced between 1 January and 30 March 2021.

Regional and sector breakdown

Virtually all markets show an increase in deal volume. Notable exceptions include the United States (down by 3%) and Eastern Europe (down by 7%). In contrast, deal value shows a remarkable recovery, including a robust 370% in MENA and 160% in the U.S.

The picture is similar from a sector point of view. For the most part, volume is up (except for energy and consumer and retail, where volume is flat, and in real estate where it has declined by 26%). Deal value is up, including:

  • Life Sciences up 253%

  • Consumer and Retail up 121%

  • TMT up 240%

  • Energy and Infrastructure up 74%

SPAC boom continues

One trend that has grown exponentially since Q3 2020 is Special Purpose Acquisition Companies (SPAC), which raise money in the IPO market, then go looking for a target.

They continue to raise extraordinary amounts of capital for acquiring targets, running at an all-time quarterly and annual record.

However, a key question remains. Can this level of SPAC activity be maintained as competition for assets intensifies?

Overall, the outlook for transactions appears robust, but the lingering economic impact of the pandemic remains a significant concern.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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