Total merger and acquisition (M&A) activity totalled $1.3tn in the first three months of 2021, the strongest opening quarter since records began in 1980, according to Refinitiv data. It was also the third consecutive quarter to surpass $1tn in this area.
M&A activity took a hit following the outbreak of Covid-19 at the end of the first quarter of 2020, but in the second half of 2020 had a robust bounce back, and that level of activity appears to be continuing.
Several major trends appear to be driving this surge in activity. For instance, 2800 private equity-backed deals were announced — an increase of 57% compared to last year — and private equity-backed buyouts accounted for 19% of M&A activity by value in this period, marking an all-time high.
Special purpose acquisition companies (SPACs) accounted for 17% of quarterly deal value, with 110 deals worth $232.1bn taking place. SPACs — shell companies which raise capital via an initial public offering specifically to be used for the acquisition of another company, usually in a defined sector — have been a major growth area, particularly in the US markets, since the second half of 2020, and there is little sign of this area slowing down.
Maintaining a theme from last year, US markets continued to dominate activity, accounting for 50% of global M&A in the first quarter. Total deal-making activity worth $670.5bn took place in US markets, an increase of 161% compared to the level of activity seen during first quarter 2020 and the strongest first quarter period for US deal-making on record.
However, activity also grew in other regions, with Asian M&A (excluding Japan) up 48% and European M&A activity increasing 23% year-on-year. Asia-Pacific deal-making had a six-year high at $217.7bn and European activity marked a three-year high at a total $274.2bn. Japan proved the exception, where M&A reached $19.7bn in announced deals, down 22% compared to a year ago and marking a two-year low.
The first quarter of 2021 also reflected the continued recovery of cross-border M&A activity, which had been hit hard during the early months of the pandemic. Cross-border deals totalled $457.8bn during the first quarter of 2021, a 135% increase compared to a year ago and the strongest opening period since records began.
Separate data in Refinitiv’s ‘Deal-makers M&A predictions for 2021’ report suggests that M&A professionals are optimistic that the favourable market conditions will continue. Some 42% of deal-makers surveyed expected to see an increase in global M&A activity in 2021, and 47% expected levels to remain the same. Even if levels were to remain the same, that would still mean historically high levels of activity are taking place. Just 10% of deal-makers expected to see a decrease in global M&A during 2021.
