M&A activity in the first six months of 2021 hit an all-time high with deals worth more than US$2.6t. More than half of the activity was recorded in North America, which saw deals worth US$1.4t (up from US$345b in H1 2020) Asia-Pacific region saw M&A values of US$446b, a jump from US$222b in H1 2020, and an increase from US317b in 2015-2019. Europe followed, recording US$412b, up from US245b in and exceeding the H1 2015-2020 average of US356b.
Despite a drop in the total number of deals disclosed, a surge in billion-dollar deals, with 479 announced so far this year, has been the main driver of activity. Even though many sections of the global economy are still restricted, cross-border transactions have made a strong comeback, rising to US$688 billion in H1 2020 from US$236 billion in H1 2019, well above the average of US$480 seen in the five years before the COVID-19 epidemic.
Andrea Guerzoni, EY Global Vice Chair – Strategy, and Transactions, says:
“Dealmakers are operating in a once-in-a-lifetime market” EY Global Vice Chair – Strategy and Transactions, says: Dealmakers will always be on the lookout for innovative funding solutions The recent increase in larger PE deals and examples of collaboration within PE firms point to deals getting off the ground with an open mind when it comes to financing solutions.
Optimism drives activity in North America and Europe, domestic deals power M&A in China
When it comes to outbound and incoming transactions, North America and Europe are the most active regions. The United States leads the list of countries with the most outbound transactions, with $221 billion in H1 2020. Canada is second, while the Netherlands and Ireland are the outbound M&A front-runners, with US$53 billion from an average of US$21 billion from H1 2015 to H1 2019.
Inbound M&A is increasingly focusing on the United States and the United Kingdom. Inbound transactions in the United States increased by more than 250% in H1 2020 (to US$200 billion), and by 60% in the five years before the pandemic (to US$125 billion). Meanwhile, China’s domestic dealmaking is at an all-time high, with M&A value exceeding US$197 billion so far this year, eight times that of foreign-invested agreements.
Guerzoni says, “North America, in particular, the US, and Europe appear poised for above-trend deal activity. In China, the economic strategy to boost domestic demand amid tensions with the US is creating a hotbed for domestic M&A. The technology, consumer, and logistics sectors are dominating on the back of the e-commerce boom kickstarted during the COVID-19 pandemic.”
New media landscape and ESG-related acquisitions drive sector activity
In 2021, the media and entertainment industry saw some of the most significant transactions. When compared to the pre-pandemic average, technology-related transactions have increased by more than 161% (to US$783 billion). M&A activity in the renewables sector has nearly tripled since H1 2020, as CEOs seek to leverage mergers to satisfy aggressive environmental goals. The value of these environmental, social, and governance (ESG)-related transactions has increased from $35.7 billion in the first quarter to $96.5 billion in the second.
The media and entertainment industry is exploding as companies seek to combine and complement their capabilities to position themselves in this new direct-to-consumer content delivery model.
According to Esmerelda Guerzoni, “With many CEOs and investors pledging to adapt their current and future deal strategies with sustainability and long-term value generation, ESG is increasingly becoming a fundamental aspect of investment decisions.”