Despite the covid health crisis, the M&A market is doing very well. For 2021, the value of M&A transactions worldwide has reached $5,800 billion*, surpassing the all-time record of $4,500 billion set in 2007. Bubble or lasting phenomenon? AURIS Finance, specialists in M&A consulting, looks back on an extraordinary 2021.
Some observers have described the M&A market in 2021 as ‘transactional bulimia’ as the number of deals has soared. In the European market alone, the volume of transactions in the first half of 2021 jumped by 59% year-on-year, while deal value increased by 111% to $500 billion. The sharp increase in the first half of 2021 can be explained by the catch-up effect of transactions prevented by the various lockdowns during covid. However, the year continued with the same momentum, confirming the strong increase in the number of transactions completed by both very large and smaller companies.
Explaining this dynamic momentum
There are a number of reasons for this frenzy. First, investment funds are currently flush with liquidity. In addition, interest rates remain low – despite inflation across the Atlantic – as the Fed has decided to pursue its strategy of negative long-term interest rates. Together, these two factors are pushing company valuations higher. 2021 saw a number of megadeals, such as AT&T’s $43 billion acquisition of Discovery Inc and Canadian Pacific’s $31 billion purchase of Kansas City Southern. In France, nearly twenty transactions worth more than €1 billion were initiated in 2021, 9 more than in 2020. It is worth noting that transactions in the technology, financial, industrial, energy, and electricity sectors now account for the majority of completed deals.
Synergies and cost savings
For companies looking to acquire new targets, the stated goal is to create synergies and gain new market share. A study by Bain & Company details the motivations behind inorganic growth operations. It appears that the health crisis has had a significant impact on the search for targets. Indeed, the urgent need to acquire new digital capabilities is the most important reason for companies to rush into an alliance. Mergers and acquisitions are now seen as a fundamental pillar of corporate growth: 45% of professionals surveyed by the consultancy see them as a growth driver over the next three years, up from around 30% in previous years.
The prevalence of investment funds
In addition to companies acquiring rivals, investment funds are increasingly present. Their aim is to hold companies for a short term with a view to reselling them quickly after adding value. In 2021, the proportion of French M&A transactions carried out by funds increased by between 25% and 35% in value terms compared to the previous year. CVC Capital Partner, for example, acquired Cooper-Vemedia, a specialist in over-the-counter medicines, for €2.2 billion.
Get the support you need
Given the dynamism of the M&A market, 2022 should be a year of great opportunity for company directors looking to sell their businesses. Whatever your project, AURIS Finance’s experts are at your side.
*Source: Refinitiv – Dealogic
