LONDON: Global merger and acquisition (M&A) activity hit record highs in the third quarter as companies and investors shaped their post-Covid future through transformative deals while their advisers struggled to cope with transaction volumes never seen before.
A frantic summer of merger activity produced deals worth US$1.52 trillion (RM6.37 trillion) in the three months to Sept 27, up 38% from the same quarter last year and more than any other quarter on record, according to Refinitiv data.
Third-quarter volumes drove global M&A activity in the first nine months of 2021 to an unprecedented record of US$4.33 trillion (RM18.13 trillion), overtaking an all-time annual peak of US$4.1 trillion (RM17.17 trillion) hit before the financial crisis in 2007 and forcing investment banks to hike pay for overworked and disgruntled junior employees.
“The path to recovery is increasingly clear and people are looking beyond Covid,” said Birger Berendes who co-heads M&A in Europe, Middle East and Africa at Bank of America.
“Investors are flush with cash and want companies to look for acquisitions in areas where they need to grow or add capabilities and services rather than just paying dividends or buying back shares.”
Third-quarter volumes doubled in Europe with US$473bil (RM1.98 trillion) worth of M&A deals compared with the same quarter last year while the United States was up 32% to US$581bil (RM2.43 trillion) and Asia-Pacific rose 21% to US$365bil (RM1.53 trillion).
“M&A is a confidence game. Both corporates and sponsors feel very good about the current environment and that’s why they are aggressively pursuing opportunities before there is a market correction,” said Dirk Albersmeier, global co-head of M&A at JPMorgan.
“Investors are sensitive about factors like inflation, interest rate developments and increased regulatory scrutiny,” he added.
While US President Joe Biden’s upcoming tax reforms are likely to increase the cost of doing deals, top M&A bankers said they do not expect a slowdown in deal-making in the near term.
“The new tax policy is not even a discussion point. Not impacting deals, whatsoever – probably a reflection on how people feel about the likelihood that it’s going to come into fruition next year,” said Mark Bekheit, an M&A partner at law firm Latham & Watkins LLP.While the market for blank cheque companies has faced headwinds, a US$32.6bil (RM136.53bil) special-purpose acquisition company deal led by Lionheart Acquisition Corp II for US firm MSP Recovery topped up the quarterly charts.
Other sizeable deals include Square’s US$29bil (RM121.45bil) takeover of Afterpay, Vivendi’s spinoff of Universal Music Group and an ￡18.4bil (RM103.63bil) swoop by US sports betting firm DraftKings on Ladbrokes owner Entain.
Progress made by Western economies to vaccinate their adult population and the easing of Covid-19 restrictions during the summer fuelled animal spirits with bidding wars erupting among private equity firms for control of listed companies including British supermarket group Morrisons. — Reuters