According to the global provider of financial market data and infrastructure, Refinitiv, the value of both US and international mergers and acquisitions hit record highs during the first half of 2021, with $1.3 trillion in U.S. deals accounting for 47% of the $2.8 trillion in worldwide M&A.
Deals in the $5 billion to $10 billion range tripled, and mega deals were up 82%. Private equity-backed transactions reached an all-time high. Amid stricter oversight by the Securities and Exchange Commission, Special Purpose Acquisition Companies (SPACs) announced 201 transactions totaling more than $387 billion during the first half of the year.
Cross-border M&A is at a three-year high up 95% compared to a year ago, marking the most substantial opening period for cross-border M&A since 2018. The Technology, Financials, and Industrials sectors made up 45% of the deal activity.
European company targets reached a three-year high totaling more than $580 billion during the first half of 2021. Asia Pacific deal-making totaled $561.9 billion, an 84% increase and an all-time high. In comparison, M&A activity in Japan reached US$48.0 billion in announced deals, up 12% compared to a year ago and marking a 14-year high.
Fast innovation, changes in the technology supply chain, and the drive by many companies toward the cloud and other areas of digital transformation are spurring deal-making involving technology companies. The number of technology deals increased 52% over last year totaling $671.6 billion during the first half of 2021, marking an all-time high and more than triple 2020 levels.
Financial services accounted for 11% of overall M&A, up 29% compared to a year ago. Energy & Power deal-making accounted for 11% of activity during the first half of 2021, a 188% increase compared to a year ago.
It is expected that deal-making will likely remain robust throughout the remainder of 2021, fueled by several factors, including remarkably low borrowing costs and a return to economic growth, according to M&A specialists.
According to the International Monetary Fund, the US and global economies are bouncing back from the pandemic-induced downturn and will likely grow this year by 6.4% and 6%, respectively. Also, private equity firms hold a record $1.6 trillion in “dry powder, putting increasing pressure on deal-makers to identify investment opportunities quickly as the recovery picks up,” according to data, analytics, and insights provider Preqin. “Current trends for deals show no signs of slowing.”
The SEC constrained SPAC IPOs in April by issuing guidance warning companies about the accounting treatment of SPAC warrants and the liability risk of forward-looking disclosures. Specifically, the SEC said that SPAC warrants, depending on their terms, shouldn’t be treated as equity investments but as liabilities.
It is estimated that more than 500 SPACs are looking for target companies, and despite tougher oversight, these companies will still look to strike a deal. The SEC restrictions will eventually strengthen investor trust and set the groundwork for a rebound in SPAC deal-making, Duff & Phelps said in a report.
No matter how you look at it, the next 6-12 months will still hold some uncertainty as the pandemic continues to be unpredictable and governments consider reapplying restrictions. However, the trends are positive, and it seems that now is an excellent time to consider your options, either as a buyer or seller.
Rooney Nimmo has extensive experience working on transactions of all sizes across the US and cross-border. If you have any questions or need advice on IP protection, please email Allan Rooney, Tim Davis, Elannie Damianos, or Abbey Docherty or call +1 212 545 8022.
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