Transactions across the world continue to break records, as investors take advantage of favorable market conditions to deploy capital at an accelerated pace.
Thinking back to the second quarter of last year, when trading practically came to a halt as the pandemic hit, it seemed inconceivable at the time that the market would recover so quickly and so strongly.
Yet the third quarter of 2021 marks the fifth consecutive quarter in which the global transaction value has surpassed $ 1 trillion, an unprecedented rise since the financial crisis of 2007/8.
Global market conditions favor transactions
Investors are always rich in cash and debt financing at affordable rates remains readily available. While there are lingering concerns that central banks will raise interest rates to control rising inflation, so far this has not deterred negotiators.
In this context and despite a quieter month of August, especially in North America, the value of global transactions increased by 92% in the third quarter of 2021, while the number of announced transactions increased by 28%.
Cross-border activity continues to recover strongly after being depressed last year, with the value of these transactions increasing by 99% and the volume by 39%. But domestic activity remains just as strong, up 88% in value and 24% in volume.
Private Equity (PE) investors are deploying high levels of accumulated capital at a faster rate and we have seen strong growth in both debt buybacks and commercial sales.
However, with the auction processes attracting strong competition, deal multiples are again rising rapidly, which may give some investors pause.
Mega-deals are very present again as values ââincrease in all areas:
Transactions worth over $ 5 billion
Transaction worth more than $ 10 billion
Growth in most regions
Almost all regions are showing strong growth except Eastern Europe / Central Asia where we saw a 5% increase in transaction volumes and a 19% decline in transaction values.
Among the best performing countries is Latin America, where values ââand volumes climbed 258% and 46% respectively, mainly due to increased activity in Brazil. Transaction values ââin sub-Saharan Africa rose 624%, although this was largely attributable to Prosus and its voluntary share exchange offer to Naspers shareholders.
The TMT sector continues to shine
Telecom, Media and Technology (TMT) offerings continue to outperform the market, with offerings up 114% and volumes up 39%. A number of mega-deals supported this performance, including Dell’s VMware spin-off and the Discovery / Warner Media transaction.
The life sciences sector continues to be busy with values ââup 112%. However, we are seeing fewer mega-agreements than in the past in favor of more medium-sized agreements and alliances, especially in the biotech and pharmaceutical segments.
And some sectors are proving to be much more resilient than one would expect at the height of the pandemic. Consumer and Retail is one example, with transaction values ââup 49% and volumes up 33%.
Around the same time last year, market watchers wondered if the strong, but still nascent, recovery in trading could continue.
This question has been clearly answered in quarters ever since.
Potential dangers lie ahead, especially given the continued economic impact of Covid-19. But for now, there is good reason to believe that the M&A market will continue to grow in the fall and into 2022.
Global M&A Snapshot Q3 2021