Mon. Jan 17th, 2022

Global mergers and acquisitions for 2021 have risen to their highest levels since records began more than four decades ago, thanks in part to booming markets and widespread stimulus measures.

Transactions worth more than $ 5.8tn were agreed worldwide this year, according to figures from Refinitiv, an increase of 64 percent from last year and the fastest growth rate since the mid-1990s. The value of transactions was 54 percent higher than in 2019 before the pandemic.

It marks 2021 as an extraordinarily busy year, even for an industry that has accelerated for much of the past decade.

“In 2021, the stars aligned and virtually everything that could go right for [dealmaking] did, ”says Frank Aquila, head of M&A at law firm Sullivan & Cromwell.

The M&A boom also contributed to record fees for investment banks in 2021. It totaled $ 157 billion, including $ 47 billion in fees for M&A advice, the most since records began more than two decades ago.

Central banking crisis interventions to lower interest rates, combined with widespread government support for companies hit by the pandemic, have boosted stock markets, boosted growth and provided easy access to cheap debt for transactions.

“One way to look at this is that we have flooded the world with money, markets have risen about that amount and M&A is the same,” says Andre Kelleners, head of M&A in Europe at Goldman Sachs.

This year’s biggest deals included WarnerMedia’s merger with rival Discovery to create a combined company with an enterprise value of about $ 132 billion, and the Canadian Pacific Railroad $ 31 billion acquisition of competitor Kansas City Southern.

“There’s a mass reorganization of businesses out there,” said Alison Harding-Jones, head of M&A for Europe, the Middle East and Africa at Citigroup. Companies “take advantage of the interest rate environment and the relatively high share price environment” and try to “position for growth,” she said.

Private equity groups and special purpose acquisition companies, known as Spacs, fueled the boom. Buyout group transactions, including KKR’s offer of € 33 billion for Telecom Italia, was worth more than twice as much in 2021 as the previous year.

“I do not think private equity can take over Apple tomorrow, but I think in short they can do almost any company,” said Alvaro Membrillera, a partner at law firm Paul Weiss in London who advises buyout groups.

A total of 334 Spac transactions – where a company is created to list and merge with a private business and bring it to the stock market – have been announced, for companies worth a combined $ 597bn, or 10 percent of worldwide transactions by value. This includes a planned merger of former US President Donald Trump’s social media startup with Digital World Acquisition Corp, which is now regulators investigation.

However, activity in the Spac market slowed towards the end of the year, after a strong start.

“Spac capital raising and Spac mergers were overdone in the first quarter of this year,” said Anu Aiyengar, global co-head of M&A at JPMorgan. The vehicles “should be a percentage of the market, but a much smaller percentage than what we saw this year”.

The boom in transactions has put the industry in the sights of U.S. competition regulators. Lina Khan, who has been appointed chairman of the Federal Trade Commission this year, has expressed concern about too much economic activity concentrated in the hands of a few corporate giants.

She was too to work closer with Margrethe Vestager, EU competition commissioner, who according to one top lawyer could lead to more transactions being blocked.

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