Global M&A in 2021 comparable to 2007 frenzy: BCG

Global M&A (merger and acquisition) deal activity that gained pace in the second half of 2020, shrugging off a brief pandemic-induced lull, continues to see momentum in the current year. The space is buzzing with an unabated flow of deals. “M&A activity has been booming in 2021, at levels comparable to the 2007 frenzy,” said analysts at Boston Consulting Group (BCG) in a recent report. Deal value in the first half of 2021 was about 22% higher than the second half of 2020 and a massive 136% higher than the first half of last year. Deal volume in the first half of the year has shown a 32% increase over the year-ago period.

North America led the space in terms of deal value which reached a record high in the first half of 2021, marking a 35% growth compared with the second half of 2020. The Middle East, Southeast Asia and Australia-New Zealand are the other regions that managed to reach record levels of deal value and saw the highest growth relative to the second half of 2020, the report showed.

The 2021 global M&A activity is largely being driven by the media & entertainment and energy & utilities sectors. The two segments recorded the strongest deal flow through September. About 38 mega deals have been inked as of late September 2021, considerably higher than a total of 26 megadeals announced last year. Megadeals are typically with a value higher than $10 billion._According to the BCG report, a notable deal of the year so far is sale of Warner Media (owned by AT&T) to Discovery, in an estimated transaction of $65.3 billion.

Analysts are quite optimistic about the M&A trajectory in the years to come. For one, the general uptick in economic activity due to a host of factors, including pent-up demand and government assistance to individuals and businesses, should promote M&A activity, they said. Besides, the demand side of the M&A market is flush with capital. “In addition to the record amounts of PE and VC dry powder, many SPACs (special-purpose acquisition companies) have recently entered the market and will be looking for targets during the next 12 to 18 months,” analysts said in the report. Experts also pointed out that in some industries such as steel, companies will continue to use M&A to reduce overcapacity and consolidate. “A resurgence of cross-border deal activity is on the horizon. This will be driven, in part, by the restoration of international travel after the pandemic. Moreover, the need for global or regional scale will promote cross-border M&A in industries such as semiconductors and media,” analysts observed.