Why global M&A deal value hit an all-time high in first half of 2021

7 minute read 6 Aug 2021
By Andrea Guerzoni

EY Global Vice Chair, Strategy and Transactions

Advising Boards and CEOs on transformational deals from strategy through to execution. Global Leader of Strategy and Transactions service line. Innovator and team player.

7 minute read 6 Aug 2021

Watch Andrea Guerzoni on CNBC, discussing global M&A activity pointing to a fundamentally strong market moving forward.

In brief
  • A spike in billion-dollar deals has driven M&A activity, with North America and Europe dominating both outbound and inbound transactions.
  • China has seen record value for domestic M&A as geopolitics mark inward shift.
  • Streaming wars and increasing focus on ESG have fueled transactions in media and renewables sectors.

Global mergers and acquisitions (M&A) activity hit an all-time high in the first six months of 2021, with deals worth more than US$2.6t, up from US$926b year-on-year and surging past the pre-pandemic five-year average (H1 2015-2019) of US$1.6t, according to EY analysis.

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) – almost double the average seen in the five years prior to the pandemic (US$784b). North America was followed by Asia-Pacific, which saw M&A values of US$446b, a jump from US$222b in H1 2020 and an increase from an average of US$317b in H1 2015-2019. Europe follows, recording US$412b, up from US$245b in H1 2020 and exceeding the H1 2015-2019 average of US$356b.

Despite a fall in the total number of deals announced, a spike in billion-dollar deals is the key driver behind activity so far this year. And despite many parts of the world economy still operating under restrictions, cross-border transactions have also staged an impressive comeback increasing to US$688b from US$236b in H1 2020 and above the average of US$480 recorded in the five years prior to the COVID-19 pandemic.

Record-high M&A deal value

$2.6t

deals worth more than US$2.6t, an all-time high, in the first six months of 2021.

Dealmakers find themselves in the sweet spot between optimism about economic prospects, progress in the vaccine roll out in key economies, low cost financing and record amounts of private capital dry powder. Dealmakers will always be on the lookout for innovative funding solutions, and SPACs (special purpose acquisition companies) started the year as the main show in town, particularly in ecommerce and electric vehicles deals. After recording peak numbers in the early months of 2021, SPAC activity has slowed recently, but the M&A momentum has continued pointing to a fundamentally strong market moving forward. 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

M&A activity, despite the strong headline figure, is not evenly spread across the globe. When it comes to outbound and inbound transactions, North America and Europe are the main centers of activity. At the same time, the US and the UK are emerging as the most attractive destinations for inbound M&A. Meanwhile, domestic dealmaking in China is running at record pace.

New media landscape and ESG-related acquisitions drive sector activity

While technology-related transactions are leading the way with an increase in value of more than 161% (to US$783b) compared with the pre-pandemic average, the media and entertainment sector is on fire, as businesses increasingly look for ways to combine and complement their strengths and position themselves in this new direct-to-consumer way of delivering content. 

In addition, M&A into the renewables sector has almost tripled compared with H1 2020 as CEOs look to use transactions to meet ambitious environmental targets. The value of these environmental, social and governance (ESG)-related transactions has jumped from US$35.7b in H1 2020 to US$96.5b in H1 2021. Clearly, ESG is increasingly becoming an integral part of investment decisions, with many CEOs and investors committing to adapt their current and future deal strategies with sustainability and long-term value creation at the forefront.

Summary

According to EY analysis, the first six months of 2021 saw an all-time high in deal value.

About this article

By Andrea Guerzoni

EY Global Vice Chair, Strategy and Transactions

Advising Boards and CEOs on transformational deals from strategy through to execution. Global Leader of Strategy and Transactions service line. Innovator and team player.