‘Turbocharged’ M&A market could hit a record $6 trillion by year end, says KPMG

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  • KPMG says deal-making activities around the world could reach a record $6 trillion by the end of the year as businesses seek cheaper financing and continue to recover from the pandemic.
  • Global mergers and acquisitions volume has crossed $4.3 trillion so far this year, up from a total of $3.6 trillion in 2020.
  • With “pent-up energy” from pre-pandemic fundraising still in full swing, KPMG’s Stephen Bates says the boom is set to continue.

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KPMG has said deal-making activities around the world could reach a record $6 trillion by the end of the year as businesses seek cheaper financing and continue to recover from the pandemic.

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According to Refinitiv data, global mergers and acquisitions volume has exceeded $4.3 trillion so far this year, approaching an all-time high of $4.8 trillion in 2015.

This marks a total increase of $3.6 trillion in 2020. With “pent-up energy” still in full swing from pre-pandemic fundraising, KPMG partner and head of transactions for Singapore, Stephen Bates, said he sees no sign of it. slowing down.

The M&A market is fully turbocharged at the moment.
Stephen Bates
Partner and Head of Transactions (Singapore), KPMG
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“The M&A market is completely turbocharged at the moment,” Bates told CNBC’s “Street Science Asia” Friday.

“Fundraising saves a lot of energy [in 2018 and 2019] Which didn’t happen last year. That dry powder is being applied now.”

Corporates, private equity and SPAC lead the charge

The technology, financial services, industry and energy sectors accounted for the majority of deals this year, led primarily by corporates, private equity and SPACs, or special purpose acquisition companies.

SPACs, which have grown in popularity, have no commercial operations and have been established only to raise capital from investors for the purpose of acquiring one or more operating businesses. They raise capital in an initial public offering and use the cash to merge with a private company and take it public.

The US still accounts for the majority of deals, Bates said, although Europe posted the fastest growth of 50% year-on-year. Meanwhile, Asia grew 20% year-on-year.

The jump in deals comes against the backdrop of low interest rates and stagnant growth amid the coronavirus pandemic, which has prompted businesses to look for alternative sources of growth. Indeed, according to the September KPMG survey, Eight in 10 (86%) CEOs It is said that inorganic resources will be the main source of their development in the next three years. Examples of inorganic developments include mergers and acquisitions, joint ventures and strategic alliances, the report said.

As that momentum continues, I think we’ll see that flow in the first quarter of next year.
Stephen Bates
Partner and Head of Transactions (Singapore), KPMG

“We are in a fairly low growth environment and this means that CEOs are looking to develop products, markets and capacity in other markets,” Bates said.

Bates said the trend is set to continue through the end of the year, when deals could hit the “nearly $6 trillion mark” and perhaps as early as 2022.

“With interest rates staying low, the positive sentiment still remains… I think as momentum [will] continue. I think we’ll see that flow in the first quarter of next year,” Bates said.

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