Global M&A Activity Soars by 88% to $2.4 Trillion in H2 2020, Strongest Second Half in History

The global mergers and acquisitions (M&A) deal value amounted to $3.6 trillion in 2020. Compared to a similar period in 2019, that was a 5% decline. It was a rollercoaster year for deal work, with the first half being one of the worst and the second being the exact opposite.

According to the research data analyzed and published by Sijoiturahastot, global M&A deal value amounted to $1.2 trillion during the first half of the year. In comparison to previous year levels, it was 41% lower. It was also the slowest first half since H1 2013.

Compared to Q1 2020, there was a 25% decrease in M&A activity in Q2 2020. Q2 2020 was also the slowest quarter of deal making since Q1 2012.

In terms of the total number of deals closed, H1 2020 saw a 16% decline, marking a six-year low. However, a strong H2 2020 nearly wiped out the disaster that was H1. The second half of 2020 saw two consecutive quarters of deal value surpassing $1 trillion. In total, the value of the M&A deal activity in H2 2020 totaled $2.4 trillion.

Comparing H2 2020 to the first half of the year, that was an 88% uptick, marking the strongest consecutive half-year increase in history. The previous record was set in the second half of 1997 when there was a 46% increase. Furthermore, H2 2020 was the strongest second half in history in terms of deal value.

Deal Volume Plummets by 4% in 2020 Marking Four-Year Low

The total M&A deal activity total of $3.6 trillion in 2020 set a three-year low. The previous low, which was set in 2017, saw total the deal value reach $3.2 trillion.

In terms of the number of deals in 2020, there was a 4% decline, marking a four-year low. Noteworthy too is the fact that the number of deals worth $10 billion and above decreased by 21% YoY. On the other hand, the number of deals valued between $5 billion and $10 billion increased by 38% YoY, and their value shot up by 36% YoY.

In total, there were 78 mega deals (valued at $5 billion or higher) during H2 2020, the highest second half total in history. For the YTD period, the number of mega deals reached 116, up from 97 in 2019.

There have only been three instances when the number of mega deals has reached or surpassed the 2020 total. These were in 2018 (116 mega deals), 2015 (129) and 2007 (125).

During the month of October alone, there were 20 mega deals, the highest in 2020 and second highest in history.

US Deal Value Declines by 21% as Europe Shoots up by 34%

In the US, total deal value declined by 21% YoY from $2.2 trillion in 2019 to $1.4 trillion in 2020. That was its slowest year since 2017, when total deal making value reached $1.3 trillion.

EY points out that the US market had a decline of 80% in M&A activity at the height of the pandemic.

Activity picked up during the latter part of the year, resulting in an increase of 157% in H2 compared to H1 2020. During Q4 2020, there was an increase of 32% over Q3.

Europe had a 34% uptick, with total deal value reaching $988.6 billion up from $735 billion in 2019.

To a great extent, Europe’s performance was attributed to having six of the largest deals announced in 2020. These included the Unilever PLC’s dual-headed share unification deal valued at $107 billion.

Asia Pacific saw a 15% increase, with deal value amounting to $871.5 billion up from nearly $758 billion in the previous year. That marked the strongest YTD performance for deal making in the region since 2018.

Technology was the leading sector in 2020, posting a 49% uptick to reach $679.2 billion. The sector accounted for a remarkable 19% of total M&A activity YTD.

Financials came in second with a total deal value at $489.6, down 6% YoY. Energy and Power were third, accounting for 12% of deal activity, despite posting a 13% YoY decline.

The industrial sector followed with deals worth $400.6 billion, a 10% decline YoY. It accounted for 11% of total M&A. In contrast, the consumer sector was among the most exposed, sinking 16% at $156 billion.          

According to EY, the stronger than expected H2 rebound in global deal making is set to continue into 2021.

Among the reasons it cites is the growing popularity of Special Purpose Acquisition Companies (SPACs). These, it says, could bring additional forms of capital to the market. Moreover, alternative deal models such as joint ventures and alliances could also fuel deal making.