A wave of big deals in the final weeks of 2020 drove global mergers and acquisitions to the $ 3.6 billion mark in 2020. This is an impressive rebound in M&A activity in the second half of the year.
The Financial Times reports that the total value of M&A deals in 2020 was down around 5% from 2019. However, this is a dramatic rebound from the first half of the year when the spread of COVID-19 stalled deals.
Details on the comeback of the second half
Since the beginning of July, companies have completed more than $ 2.3 billion in global mergers and acquisitions, according to Refinitiv, an 88% increase over the first half of the year. Activities in the third and fourth quarters of 2020 were each more than $ 1 billion. This is only the second time since 2008 when transactions were above this level for consecutive quarters.
Although he saw “no real M&A environment” at the beginning of the year, Salesforce CEO Marc Benioff pulled the trigger for the acquisition of Slack in December. As part of the $ 27.7 billion acquisition, Slack shareholders will receive $ 26.79 in cash and 0.0776 Salesforce common shares for each Slack share.
Biden Win is also promoting the resurgence of global mergers and acquisitions
Dealmakers said activity improved in the second half of the year thanks to the promise of vaccines to treat the coronavirus and political certainty in the United States following the victory of former Vice President Joe Biden in November.
For example, Asian stocks were largely higher in hopes of additional economic stimulus after Congress confirmed Joe Biden as the winner of the January 6th presidential election. In the fourth quarter alone, the media announced deals worth more than $ 1.3 trillion.
Q4 saw major global mergers and acquisitions
The acquisition of IHS Markit Ltd. $ 39 billion worth by S&P Global Inc. came immediately after the technology’s mega-deal, including the $ 35 billion purchase of Xilinx Inc. by chipmaker Advanced Micro Devices Inc. and the major acquisition from Slack through Salesforce.
Other notable deals in the last three months of the year included AMD’s takeover of rival US chip maker Xilinx for $ 35 billion and UK pharmaceutical company AstraZeneca ‘s acquisition of US biotech company Alexion for $ 39 billion .
Anu Aiyengar, co-head of global mergers and acquisitions at JPMorgan Chase, told the Financial Times, “Outside of Covid, this is a good environment for doing business. Stock markets are high, interest rates are low, and equity investors are happy to pay for growth. “
Interestingly, in many of these transactions, the acquiring company used its own shares as its primary currency and took advantage of the rising stock markets. S&P Global and AMD pay 100% for their businesses with their own shares. AstraZeneca pays about two-thirds of its purchase with its stock, and Salesforce only pays 50% of its Slack deal in its own stock.
Diversification led to some deals
Stephan Feldgoise, co-head of global mergers and acquisitions at Goldman Sachs, said several businesses were also spurred by companies’ desire to diversify their portfolios. “The balance has shifted as companies now see growth and diversification in scale and a bigger balance sheet is just as important as focusing on growth opportunities,” he told the Financial Times.
Despite an increase in the total number of American deals, total value in the region for 2020 as a whole fell 21% to $ 1.4 billion. Outside of North America, Europe was a bright spot for deals compared to recent years. Compared to poor performance in America, activity in Europe increased 34% to $ 989 billion and Asia increased 15% to $ 872 billion. In fact, the Asia-Pacific region made the strongest return in the second half of the year, and the region could extend its recovery into 2021, with China leading economic growth.