Chapter 2 of the Gilbert + Tobins 2021 Takeovers + Schemes Review (below) examines which sectors made the greatest contribution to public mergers and acquisitions in 2020.
- Energy and resources led the way in both total transaction value (37%) and number of transactions (33%, which was twice the number of transactions in this sector compared to last year).
- The financial sector saw strong public M&A activity in terms of transaction size.
- Food, beverage and tobacco were major contributors to total transaction value, largely driven by Coca-Cola European Partners’ proposed acquisition of Coca-Cola Amatil for $ 9.8 billion.
Contribution of the energy and extractive sectors to public mergers and acquisitions
The energy and raw materials sector was the strongest performing sector in 2020 in terms of both total transaction value and number of transactions. This sector contributed 37% of total business value (up from 7% in 2019) and 33% of total business activity.
The sector has been in decline since 2011 when commodity prices peaked, and 2014 was the last time the sector was led by both transaction value and activity.
There were 14 transactions in the energy and raw materials sector in 2020, compared to seven in 2019. The main transactions in this sector were:
- Northern Star Resources’ successful acquisition of Saracen Mineral Holdings for $ 5.8 billion (one of only two transactions in 2020 valued at over $ 5 billion); and
- SSR Mining’s successful acquisition of Alacer Gold for $ 2.7 billion.
The presence of competing cardinal resource offerings from Shandong Gold, Dongshan Investments, North Gold and Engineers & Planners Co also demonstrated the strength of activity in the sector.
Gold was the standout subsector. Nine of the 14 energy and resource transactions were for targets related to gold mining or exploration. A rise in gold prices in 2020 was undoubtedly a factor as the uncertainty of the pandemic spurred investors to move to the safe haven gold and gold assets offer, including a hedge against the prospect of future inflationary pressures.
More key sectors in 2020
Groceries, beverages and tobacco took second place (30%) in terms of deal value, and real estate came third (10%). However, food, beverage and tobacco activity saw a decline as only one high quality transaction was responsible for the strong performance. That was the $ 9.8 billion acquisition of Coca-Cola Amatil proposed by Coca-Cola European Partners.
In terms of the number of transactions, the financial sector made the second largest contribution to the transaction volume with 19%, followed by the professional services sector (12%).
The share of transactions in the healthcare sector, which led the way in 2019 by total transaction value, fell from 27% of total business value in 2019 to just 4% in 2020. The number of public health mergers and acquisitions also fell from six transactions in 2019 to just one in 2020 (this was EQT’s successful acquisition of Metlifecare under an agreement that came after a previous offer was withdrawn by the same acquirer who blamed the pandemic). COVID-19 has undoubtedly had a significant impact on the sector as hospitals and healthcare systems suffered the brunt of decreased patient volumes and revenues, as well as increased labor and care costs. We believe that the reduced healthcare mergers and acquisitions represent an anomaly in our data set focusing on acquisitions and programs as there have been a number of private healthcare mergers and acquisitions in the healthcare sector. We believe that general interest in this sector will remain in light of the COVID-19 pandemic, advances in healthcare and an aging population.
Top deals by sector
The five most valuable transactions in 2020 came from four different sectors:
Sectors of interest for foreign bidders
In 2019, there was significant foreign interest in health, retail and consumer services and industrial products. The sectors most interesting to foreign bidders in 2020 were energy and resources (seven deals) and professional services (three deals).
In terms of value, the food, beverage and tobacco sectors accounted for 44% of the total value of overseas offerings, solely due to the $ 9.8 billion acquisition of Coca-Cola Amatil proposed by Coca-Cola European Partners. It was followed by energy and resources with 23% of foreign bids based on total transaction value, with seven out of 14 deals in this sector involving foreign bidders.
- The COVID-19 pandemic has exacerbated economic pressures on the aged care sector, impacting short-term demand in private hospitals and elective surgery, and forcing structural changes in the industry with increasing home care and telehealth. These factors, as well as other general issues such as an aging population, the COVID-19 pandemic and a general focus on health, are likely to revive M&A activity in health, elderly care and pharmaceuticals.
- Companies that use and control data can expect increased activity, but also stronger regulatory control, as shown by the investigation of digital platforms and the changes to the Law on Foreign Acquisitions and Takeovers of 1975 (more on this in Chapter 4 Foreign Bidders at public mergers and acquisitions in 2020).
- Increased government spending on infrastructure and the move to decarbonise economies are likely to impact demand for various raw material and renewable energy companies and potentially lead to increased M&A activity in these sectors.
- Financial services can continue to see significant M&A activity as the big banks try to sell assets and pressures in the wealth industry persist. The recent focus on AMP is a prominent example.
- Industries affected by the pandemic, such as leisure and hospitality, could be the focus of mergers and acquisitions as economies emerge from the pandemic. This could include opportunities for distressed mergers and acquisitions if we are temporarily suspended and reopened.