{"id":111034,"date":"2021-03-31T21:42:47","date_gmt":"2021-03-31T21:42:47","guid":{"rendered":"https:\/\/fin2me.com\/?p=111034"},"modified":"2021-03-31T21:42:47","modified_gmt":"2021-03-31T21:42:47","slug":"global-ma-sets-first-quarter-record-as-dealmakers-shape-post-covid-world","status":"publish","type":"post","link":"https:\/\/fin2me.com\/markets\/global-ma-sets-first-quarter-record-as-dealmakers-shape-post-covid-world\/","title":{"rendered":"Global M&A sets first-quarter record as dealmakers shape post-COVID world"},"content":{"rendered":"

BOSTON\/LONDON (Reuters) – Mergers and acquisitions (M&A) activity surged globally in the first quarter of 2021 to a year-to-date record, as companies and investment firms rushed to get ahead of changes in how people work, shop, trade and receive healthcare during the COVID-19 pandemic.<\/p>

FILE PHOTO: The skyline with its financial district is photographed as the spread of the coronavirus disease (COVID-19) continues during an extended lockdown in Frankfurt, Germany, January 14, 2021. REUTERS\/Kai Pfaffenbach\/File Photo<\/figcaption>

While the number of deals was up only 6% from a year ago, the total value of pending and completed deals rose 93% to $1.3 trillion, the second-biggest quarter on record, according to data provider Refinitiv.<\/p>\n

Dealmakers said a boom in the stock market and low borrowing costs – driven by the Federal Reserve\u2019s loose monetary policies – emboldened companies, private equity funds and blank-check acquisition firms to pursue their dream deals. This is despite the global economy\u2019s failure to have fully recovered as yet from the virus\u2019 financial fallout.<\/p>\n

\u201cThis is as robust and broad-based an M&A market as I have witnessed in the last 20 years,\u201d said Colin Ryan, co-head of Americas M&A at Goldman Sachs Group Inc. \u201cWe are in an environment where assets are scarcer than the available capital right now.\u201d<\/p>\n

Dealmaking surged in most sectors of the economy, especially the technology industry, which is positioning for big changes in cloud computing and collaboration spurred on by the shift to remote working.<\/p>\n

Real estate was the only sector to record a major slump in M&A activity, as offices and other types of commercial property became less appealing to buyers.<\/p>\n

\u201cWe are still in an uncertain world. The first half will look pretty strong in M&A but in the kind of world today, it takes a brave soul to forecast a $4 trillion-plus market for the year,\u201d said Mark Shafir, global co-head of M&A at Citi.<\/p>\n

Around half the deal activity came from United States where volumes were up 160% year on year at $654.1 billion.<\/p>\n

The Asia Pacific region, excluding central Asia, was up 44.9% at $206.5 billion.<\/p>\n

In contrast, M&A activity in Europe was up 24.5% year on year at $277.3 billion, as mega-deals became more difficult to negotiate with the French government blocking a proposed 16.2 billion euro takeover of European retailer Carrefour SA by Canada\u2019s Alimentation Couche-Tard in January.<\/p>\n

\u201cThis year we have seen a continuation of cross-border activity. This is set to continue amidst a more positive business environment with vaccines becoming available, Brexit coming together and sustained low interest rates,\u201d said Celia Murray, JPMorgan\u2019s head of M&A for the UK which is Europe\u2019s biggest M&A market.<\/p>\n

Major deals in the quarter included Ireland\u2019s AerCap Holdings NV agreeing to buy General Electric Co\u2019s aircraft leasing business for more than $30 billion, Canadian Pacific Railway Ltd clinching a $25 billion deal for U.S. railway Kansas City Southern, and National Grid\u2019s purchase of WPD, England\u2019s largest electricity distribution business, for 7.8 billion pounds ($10.76 billion).<\/p>\n

Overall, volumes of deals worth more than $5 billion totaled $476 billion, up 133% year on year.<\/p>\n

\u201cWhat you\u2019re seeing right now and will see to an even greater extent throughout the year is strategics coming out of hibernation and trying to do the things they\u2019ve been thinking about for months,\u201d said Alan Klein, co-head of M&A at Simpson Thacher.<\/p>\n

A key factor in getting deals done was sell-side price expectations coming down, making it easier for investors to price assets.<\/p>\n

\u201cThe valuation gap has narrowed during the pandemic. Both realism and uncertainty have played a part in that,\u201d said Bob Bishop, global co-chair of DLA Piper\u2019s corporate group.<\/p>\n

A further catalyst for activity could come from activist investors, which are shareholders in a company agitating for change. In the first quarter, the likes of department store Kohl\u2019s Corp, French food and beverage company Danone SA and oil giant Exxon Mobil were subjects of activist campaigns.<\/p>\n

\u201cDuring the pandemic most activists primarily engaged privately behind closed doors and as a result public campaigns were significantly down compared to 2019,\u201d said Philipp Beck, EMEA M&A head at UBS Group AG.<\/p>\n

\u201cHowever, as markets normalize and corporates refocus on strategic portfolio decisions we anticipate more public engagement by activists.\u201d<\/p>\n

SPAC ATTACK<\/h2>\n

With plentiful access to cheap debt, private equity firms jumped on the deal frenzy. Their deals rose 115.8% to $250.6 billion.<\/p>\n

\u201cPrivate equity funds are standing front and centre in the dealmaking arena and driving a strong pipeline of public-to-private transactions,\u201d said Dwayne Lysaght, JPMorgan\u2019s co-head of EMEA M&A.<\/p>\n

Supporting M&A in the United States has been a surge in deal activity among special purpose acquisition companies (SPACs), which have captured the interest of Wall Street and amateur traders seeking quick profit.<\/p>\n

U.S. SPAC M&A volume was $172.3 billion in the first quarter, up 3,000% year on year and almost 75% of the total SPAC deal activity worldwide.<\/p>\n

In many cases, SPACs have emerged as serious competition to private equity bidders.<\/p>\n

\u201cIt\u2019s a different kind of competition since SPACs only want minority stakes and it\u2019s certainly a different proposition. But it makes us think that there is a wall of capital out there that is ready to be invested in either minority or majority deals,\u201d said Patrick Frowein, co-head of EMEA investment banking coverage and advisory at Deutsche Bank.<\/p>\n

Dealmakers said the strength of the global economy and state of the markets would dictate whether 2021 will be a record year for dealmaking.<\/p>\n

\u201cCurrent momentum could be derailed by a resurgence of inflation, a resulting increase in interest rates, or declining confidence – but I don\u2019t expect this in the near or intermediate term,\u201d said Peter Weinberg, founding partner and chief executive of Perella Weinberg Partners.<\/p>\n

($1 = 0.7248 pound)<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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