Pandemic recovery fuels deal craze as third-quarter M&A breaks all records

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* Global mergers and acquisitions hit an all-time peak of $1.52 trillion in Q3

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* Cheap financing leads to transformational deals

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* Volume doubled in Europe driven by private-equity buyouts

* US activity up 32% to $581 billion, Asia Pacific up 21%

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* Frantic bargaining surpasses all-year records

LONDON, Sep 30 (Businesshala) – Global mergers and acquisitions hit new record highs in the third quarter as companies and investors shape their post-COVID future through transformative deals, while their advisors see never-before-seen transaction volume were struggling to cope.

A fierce heat of merger activity led to deals worth $1.52 trillion in the three months to September 27, up 38% from the same quarter last year and more than any other quarter on record, according to Refinitiv data.

Third-quarter volumes pushed global M&A activity to an unprecedented record of $4.33 trillion in the first nine months of 2021, beating an all-time annual peak of $4.1 trillion before the financial crisis in 2007 and giving investment banks more work to do. Forced to increase salary. angry junior staff

“The path to recovery is becoming increasingly clear and people are looking ahead to COVID,” said Birger Berendes, co-head of M&A at EMEA at Bank of America.

“Investors are flush with cash and want companies to seek acquisitions in areas where they need to develop or add capabilities and services, rather than simply paying dividends or buying back shares.”

Third quarter volume in Europe doubled compared to the same quarter last year with M&A deals worth $473 billion, while the United States grew 32% to $581 billion and Asia Pacific grew 21% to $365 billion.

“M&A is a confidence game. Both corporates and sponsors feel very good about the current environment and are therefore aggressively pursuing opportunities before the market improves,” said M&A at JP Morgan Dirk Albersmeier, global co-head of AK, said.

“Investors are sensitive to factors such as inflation, interest rate developments and increased regulatory scrutiny,” he said.

While US President Joe Biden’s upcoming tax reforms are likely to raise the cost of making deals, top M&A bankers said they do not expect a slowdown in deal-making in the near term.

“The new tax policy is not even a point of discussion. Not affecting deals, whatever – perhaps a reflection on how people feel about the prospect that it’s going to flourish next year,” said M&A partner at law firm Latham & Watkins LLP Mark Bechet said.

While the market has faced headwinds for blank-check companies, a $32.6 billion SPAC deal led by Lionheart Acquisition Corp II for US firm MSP recovery topped the quarterly charts.

Other big deals include Square’s $29 billion acquisition of Afterpay, Vivendi’s spinoff of Universal Music Group and Ladbrokes owner Anten for £18.4 billion by US sports betting firm DraftKings.

animal spirits

Progress made by Western economies to vaccinate their adult populations and the easing of COVID restrictions during the summer fueled animal spirits, with bidding wars between private equity firms vying for control of listed companies, including British supermarket conglomerate Morrisons. Gave.

Private equity purchases rose 133% to $818 billion in the first nine months of the year as investment firms rushed to deploy cash, often paying rich prices to take assets off the public markets.

Bankers say private equity firms have learned to calculate risk after the financial crisis.

“There is a clear recognition that valuations are very high at this point in time. Funds are pursuing opportunities where they believe they can add value,” said Anna Skoglund, head of financial and strategic investors group at Goldman Sachs at EMEA.

“We have moved from opportunistic, more financially driven transactions to thematic investments and platform building.”

The buying spree is expected to continue as the Federal Reserve’s bond-buying program helped push interest rates to an all-time low, offering cheap debt-financing for acquirers.

“The logic is pretty straightforward — we’re really steeped in liquidity,” said Mark Shafir, global co-head of M&A at Citigroup.

“You have an incredibly hospitable fixed income market in terms of rates and availability. So there’s a lot of bargaining opportunities.”

Carpe Diem

Deal-making grew in most sectors of the economy, particularly the technology industry – where software deals more than tripled in the first nine months of the year – along with energy and power companies as part of their transition to renewable projects. accelerates its steps towards a net-zero future.

Dealmakers say that with careful consideration of risk, corporate buyers have become more nimble to seize opportunities and better compete with private equity in fast-paced auctions.

“The Boards continue to assess a number of options to implement their strategic objectives. Clients on using M&A to accelerate their strategy,” said Umar Farooqui, co-head of EMEA M&A at Barclays Thinking a lot, where they see an opportunity to do that.”

As the threat to active shareholders resumes, bankers say the pipeline ahead will also include spinoffs to unlock value trapped in profitable units and take advantage of bullish stock markets.

Activist funds are closely watching how companies are navigating the challenges of adjusting their business models to the post-COVID world and will be a key factor in driving change.

“Market chaos causes a decline in activism. Not surprising, when the pandemic saw you a real pullback,” said David Rosewater of Morgan Stanley, managing director of Activist Defense Group.

“As the market came back, you saw the activation come back and reward additional opportunities.” (Reporting by Pamela Barbaglia in London and Anirban Sen in Bengaluru, Editing by Matthew Lewis)

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