M&A Set to Accelerate in 2021 and Beyond
The COVID-19 pandemic put businesses across the globe in a state of uncertainty and, often, panic. But there’s been a strong global rebound in M&A since July 2020. Experts think this trend will continue into 2021, even as the virus continues through nations across the world.
There has been a huge shift in consumer behavior that will drive dealmaking as businesses work to reframe their futures. Following a strange year for M&A, the increase in year-over-year values of deals recorded since the third quarter will probably continue into the new year. This prediction comes from EY research assessing global trends in 2020 and forecasting the future of 2021.
The global value of 2020 M&A is below 2019 value, but still ranks fifth for overall deal value in the post-global economic meltdown period.
The most active sectors have been technology, media and entertainment and telecommunications, with nearly 600 deals valued at $973 billion. This marks a 6 percent increase year over year. Financial services saw 901 deals with values of $352 billion, an eight percent increase year over year. Utilities deals numbered 525, with a total value of $142 billion, marking a 34 percent increase year over year.
Sectors with greater exposure during the pandemic have seen a marked slowdown. This includes industrials, with an 18 percent decline year over year, and the consumer sector, with a 16 percent decline year over year.
As we look to the new year, the sectors that showed the most restraint during the pandemic will drive the next wave of M&A. For instance, the consumer sector is already seeing an increase in M&A, particularly among assets that struggled during the pandemic.
PE firms remained active during 2020, and that will continue as these firms begin to recover. With more than $2.8 trillion in cash available, including more than a trillion dedicated to buyouts, PE is positioned well to take advantage of the anticipated value creation during 2020. Special purpose acquisition companies will likely bring additional forms of capital.
Additionally, the increased drive for alternative deal models, including joint ventures and alliances, as well as divestments to support strategic business reinvestments and shifts, will likely fuel dealmaking intentions.
These changes come as nearly two-thirds of executives report that their organizations must radically shift their operations over the next two years. To achieve that, many are turning to new technologists—artificial intelligence, internet of things, and cloud computing.
Geopolitical swings will also inform strategic decisions, including whether to enter or exit certain markets. In Europe and the United States, new American policies following the election and Brexit will be central to how executives rethink their capital allocation and overall strategy.
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