M&A market outlook 2021
2020 Global M&A Review
M&A activity declined significantly during the first half of 2020, with deal volume down 13% year-on-year (per PwC and Refinitiv data). Deal values fell also, varying widely by industry, with Telecoms increasing by close to 30%, whereas others such Aerospace, Chemicals, Pharma, and Oil & Gas all declining by ±80%.
In June 2020 PwC questioned more than 900 global CFO’s for their COVID-19 CFO Pulse survey. 25% of respondents said they would use M&A as part of their recovery strategy, to rebuild or enhance their company’s revenue streams.
According to research firm Mergermarket, Q3 saw a 33% increase in deal volume and a 140% increase in deal value over Q2. However, Q4 was the real blockbuster period with many mega-deals announced.
(Data from Refinitiv, published in Allen & Overy’s M&A Insights)
The last 4 months of the year saw a significant spike, with 12 of the year’s 20 largest transactions being announced in the period September-December.
The U.S. remains the most active outbound investor and the leading target nation for inbound investment.
Japan continues to grow its volume of outbound M&A, surpassing China to lead Asia. Chinese acquisitions of foreign targets hit their lowest level in a decade.
(Data from Refinitiv, published in Allen & Overy’s M&A Insights)
2021 Global M&A Outlook
Historically, M&A activity has correlated strongly with the evolution of share prices. From 2000-2019, the correlation between the value of the MSCI World index and M&A volume was approximately 80% (BCG analysis of Refinitiv and S&P Capital IQ data). With recovery in global stock markets taking shape, signs are encouraging that M&A activity will continue to ramp up in 2021.
53% of US executives said their companies plan to increase M&A investment in 2021.(PWC US Pulse Survey Nov 2020)
56% of US-based finance, accounting and corporate development professionals (director level and above) expect an increase in the number of deals next year. (Datasite 2021 M&A Outlook)
Over 50% believe APAC will be the biggest investment region for M&A by deal volume, driven by domestic combinations and technology deals. (Datasite 2021 M&A Outlook)
Euromonitor’s (M&A) Investment Index reflects the expected level of investment, activity and attractiveness of the global M&A market amid macroeconomic and financial shocks. The most recent index predicts that Southeast Asian M&A activity is set to increase ahead of the United States and China in 2021. Vietnam ranked third, with Indonesia and Philippines both making the top 10.
With US$2.8t in uninvested capital available, private equity firms are expected to be very active in 2021. Strategists at Goldman Sachs predict special-purpose acquisition companies (SPACs) could trigger $300 billion in M&A over the next two years. 2019 vs. 2020 saw 3x as many SPACs complete IPOs, with total capital raised being nearly 5x higher.
2021 M&A has got off to an active early start:
MGM Resorts made an US$11bn offer for FTSE 100-listed company Entain, one of the world's largest sports betting and gaming groups
The mega-merger between Fiat Chrysler and PSA Group gained shareholder approval this week, the final hurdle to the completion of a US$38bn merger to create Stellantis, the world’s fourth largest carmaker
Teledyne Technologies announced an US$8bn deal for FLIR Systems
Dentsply Sirona announced a US$1bn acquisition of Byte
Centene is to acquire Magellan Health for US$2.2bn
All this occurred on the first business day of the new year. It bodes well for the rest of 2021. Watch this space....
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