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Dealmakers record highest half-yearly M&A values despite COVID-19 disruption

The impact of the coronavirus crisis in 2020 led to subdued M&A activity in the first half, but dealmakers reached unprecedented levels of deal making in the final few months of the year. 

M&A activity in the first half of 2020 was subdued (USD 971.0bn), leading to an overall 6.6% year-on-year decline by value. Amid the social and economic disruptions caused by COVID-19, deal count was down 15.5%, from 20,767 to 17,545. While a few sectors fell, others rose, making it a bumpy ride for deal professionals.

However, Corporates and sponsors alike spent their way through the crisis in the second half of the year, with unprecedented levels of deal making in the final few months. The USD 2.2tn of overall M&A activity in 2H20 represents the highest half-year figure on record.

Technology, Media, and Telecommunications (TMT) climbed 56.8% by value compared to the previous year, from USD 543.4bn to USD 851.8bn, equivalent to more than a quarter of overall global activity. Volume, on the other hand, declined slightly to 3,943 deals.

The next best performing sector was Energy, Mining & Utilities (EMU), which also saw a 3.8% increase by value to USD 477.7bn, but a 13.8% decline in deal count to 1,326. Industrials & Chemicals rounds out the three best performing sectors in 2020, even with a 27.1% drop from the previous year - from 3,791 to 3,023 transactions.

Although M&A markets went into stasis, debt and equity capital markets came alive. In addition to a significant volume of high yield bond issuances and secondary equity offerings, special purpose acquisition companies (SPAC) became the phenom of 2H20, particularly in the US. A total of 255 SPACs were launched in 2020, raising USD 83.1 bn, compared to USD 15.5bn across 73 listings in 2019, according to Dealogic data (Mergermarket and Dealogic are owned by ION Group).

If there was a "winner" in 2020, it was mega-deal professionals. Deals of USD 5bn or greater experienced an impressive surge, increasing from 91 in 2019 to a total of 111 in 2020, with 79 of them occurring in the second half. This represented the second-highest number of such large deals since 2007, only behind 2015 (127 deals).

Meanwhile, smaller-sized transactions saw double digit declines across the board. In particular, deals under USD 250m experienced a 12.1% decline in value and 1,270 fewer transactions compared to 2019.

In spite of the pandemic, global private equity investment, buoyed by a reported dry-powder of USD 1.7tr, climbed to its highest annual value since the global financial crisis. In total, USD 608.7bn was spent by private equity firms in 2020 across 3,509 deals, 3.3% up on the 2019 (USD 589bn).

Mark Druskoff, Data-Driven Content Coordinator (North America) at Mergermarket commented: “Even as 2020 recedes into the distance, its impacts continue to shape the market. Corporates and sponsors alike have spent their way through the crisis in the second half of 2020, with unprecedented levels of deal making in the final few months of the year.”

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