The number of global mergers and acquisitions, or M&A, hit an all-time record in the first seven months of 2021. This is according to the latest figures from global provider of financial markets data, Refinitiv. Here is a breakdown of the data and a look at why global M&A activity is on the rise and how it could benefit investors.
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What’s the current state of global M&A activity?
Analysis by Refinitiv shows that US$3.3 trillion (£2.4 trillion) worth of M&A deals were recorded during the first seven months of 2021. This is more than double (116%) of the value recorded during the same period last year. It’s also the highest year-to-date (YTD) total since Refinitiv started recording the data in 1980.
In July alone, US$499bn (£359bn) worth of deals were announced, which is 49% more than the value recorded during the same month last year and the second highest July total of all time (after July 2007 where US$503.4bn – £361.6bn – worth of deals was recorded).
Further, Refinitiv reports that the number of deals announced so far this year has hit an all-time record of more than 33k, compared to 27k during the same period last year.
Worth noting is that there were a total of 35 special purpose acquisition companies (SPAC) combinations in July 2021. This is the fourth highest monthly tally of all time.
Additionally, 235 SPAC acquisitions have been announced so far in 2021, compared to just 39 year on year (YoY). This highlights the growing popularity of these types of acquisitions. SPACs are seen as an easier way to take a company public than the traditional IPO route.
Which global regions and sectors lead in M&A activity?
More than a third of the total value of global M&A deals this year came from the US (US$1.6 trillion or £1.15 trillion), with US$263.6bn (£189.4bn) being recorded in July 2021 alone.
Meanwhile, the analysis shows that European deals declined 11% from June’s figures to US$101.0 bn (£72.6bn). This is still more than double the value recorded during the same month last year. Additionally, deal making increased 56% (YoY) in Europe to a three year high of US$672.7bn (£483.4bn)
In the Asia-Pacific region, deals increased 3% from June to US$110.9bn (£79.7bn) in July 2021. This is a 20% decline from July 2020. However, M&A announcements in the region increased by 49% to an all-time YTD high of US$662.9bn (£476.4bn).
In regards to sector, the stats show that technology was the leading sector by both value and by number of deal announcements in July 2021, with more than 800 deals worth a combined US$93.3bn (67.1bn) announced.
In the YTD, tech deals total US$765.1bn (£549.8bn), which is 247% higher than last year’s value and more than double the previous YTD record of US$374.1bn (£268.8bn), which was recorded in 2000.
Overall, tech deals account for 23% of global M&A by value YTD. This is 14% higher than YTD 2020 and the highest share since Refinitiv’s records began.
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Why the increase in global M&A activity?
One of the catalysts for the increase in global M&A activity is the global pandemic. During these uncertain times, businesses are realising the importance of pooling their assets and resources to complement their strengths.
Another factor is high deal-making interest in sectors that have received a boost from the pandemic. While the pandemic has hit some sectors hard, others have actually benefited. An example is businesses that provide online services such as e-commerce sites.
Also, as reported by Reuters, some of the world’s biggest private equity firms have been able to raise large amounts of capital over the past few years.
As vaccination efforts are ramped up across the world and as major economies resume normal business, some of these companies are looking to deploy their war chests and expand their operations.
How does this impact investors?
The surge in M&A activity is good news for investors. Financial deals such as M&A can help businesses access capital, talent, as well as other capabilities and competencies that can enable them to grow in scale and thus increase value for shareholders.
High M&A activity is also good for overall economic growth, which should also benefit companies and investors both in the short term and long term.
