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.