Dealmaking has reached new heights this year, as the momentum seen each quarter continued unabated and propelled the global M&A market to a new all-time record of $5 trillion in deals – with still one month to go.
As of yesterday, global transactions have topped $5 trillion so far this year – already 40 per cent ahead of the whole of 2020, according to new Refinitiv data.
Pent-up demand during the pandemic pushed dealmakers across the globe into an unprecedented frenzy, with the number of transactions announced so far this year hitting an all-time record of more than 52,000 – 22 per cent up on last year, and more than any other year since Refinitiv began tracking the data in 1980.
And they’ve been awash with more cash than ever, too. The $5 trillion figure – with still one month to go to the end of the year – tops the previous all-time full year record of $4.2 trillion recorded in 2015.
The most active adviser on global deals this year? Goldman Sachs, who takes the lead after advising on deals worth a combined $1.5tn. In close second, rival JP Morgan advised on $1.2tn, and Morgan Stanley came in third place with just under $1tn.
It is largely due to an incredibly active US M&A market, which dominated as deals involving a US target accounted for 45 per cent of global activity so far and came to a mammoth record high of $2.3 trillion.
China is in second place, accounting for 9 per cent of all deals, closely followed by the UK in third place, where its companies have been the target for 7 per cent of all global deals.
It comes after a string of private equity buyouts of British firms this year that culminated with the £7bn Clayton Dubilier & Rice acquisition of supermarket chain Morrisons last month – the UK’s biggest leveraged buyout since 2007.
Buyout groups, flush with cash from consistently low interest rates and yield-hungry investors, have stood in stark contrast to the British firms with depressed valuations that have become a target in the last year, thanks to a combination of Brexit and the pandemic.
Private equity-backed transactions totalled $988bn globally, more than double (+118 per cent) the value recorded during the same period in 2020, and already 49 per cent more than the previous all-time annual record of $663bn set in 2007, before the last crisis.
When it comes to sectors ripe for takeovers, technology was the leading sector, accounting for a fifth of M&A investment globally.
M&A involving a tech target totals $989bn so far this year, another all-time annual record and a 94 per cent leap from last year.
And it’s a trend that those in the industry don’t see slowing down any time soon. According to a recent survey of top execs dealing with M&A at investment banks, PE houses and law firms by Ansarada, 90 per cent of dealmakers expect an increase in new deals in the next twelve months, while 54 per cent expect this to be “significant.”
More than half (54 per cent) expect the number of distressed deals in the UK to rise in the coming 12 months, reflecting the perfect storm of Brexit headwinds and supply chain disruption faced by some UK businesses. This compares with 26 per cent in Europe as a whole.
And reflecting Refinitiv’s data from the current year, one third (32 per cent) of dealmakers said they believe TMT will drive the most activity in the next year, after the pandemic drove people towards even more digital consumption.
These record new heights are made all the more noteworthy considering there are many odds stacked against dealmaking in the current climate. The spread of the pandemic shows no sign of slowing in some countries, global markets are still volatile, and Europe and US have been doubling down on competition. See the UK’s national security probe into Nvidia’s takeover of British chipmaker Arm this week, for example.
Owing to the remote work obligation during the various lockdowns, several dealmakers describe how Covid hindered the processes involved with getting a transaction through. Due diligence, in particular, took much longer.
“The UK M&A market is not fully out of the woods,” said Stuart Clout, chief revenue officer at Ansarada.
“Deals are still susceptible to a complex mix of extenuating situations. As we’ve seen, driver shortages and supply chain disruption in the UK has severely hampered UK businesses recently, and the largely expected surge in Covid cases locally is of course something to be mindful of,” he continued.
“These events will have knock-on consequences for dealmakers. Deal speed, preparation and quality due diligence is going to be essential if the expectations from the Dealmakers we surveyed are to be met.”