US banks published their Q1 results last week, showing strong results boosted by securities offerings and strong M&A activity witnessed in the quarter. As a result, we bring you today an overview of global M&A activity in Q1 2021.
The strong increase in M&A activity witnessed in the final quarter of 2020 carried its momentum into Q1 2021 as the quarter recorded double the value of deals recorded in Q1 2020. Furthermore, the value of deals was 25% higher than in Q1 2019. While many themes crossed over into 2021, such as the technology sector’s dominance and the continued strength of private equity, some notable shifts did occur in terms of deal size and geographic concentration of deals.
Global Deal Value Breakdown by Quarter 2007 – Q1 2021 (USD bn)
Cross-border deals were a significant contributor to overall activity, hitting a record of USD 516.6bn for Q1 activity and nearly returning to historical averages of more than 44.4% of total deal value. The two largest deals announced in the quarter were cross-border deals that involved US targets: AerCap Holding’s USD 31bn bid for GE Capital Aviation Services and the planned USD 28.6bn merger of Canadian Pacific Railway and Kansas City.
However, the surge in SPAC deals is partially the reason why global M&A activity recorded such an increase. Namely, M&A tied to SPACs has also been spiking, with 99 deals totalling USD 219.5bn taking place globally in Q1 2021, according to Dealogic. Also note that the average deal value for SPAC transactions in Q1 was USD 2.2bn, up from USD 1.2bn in 2020. SPACs also played a large part in the overall increase in IPO activity. Namely, more than USD 97bn has been raised by 304 SPACs during Q1.
The rising number of SPAC deals also impacted the number of larger deals which recorded an increase even as mega deals declined. According to Mergermarket, the rising buying power of SPACs may be one factor in the rise of deals in the USD 2bn to USD 5bn range. Namely, deals between USD 2bn and USD 5bn have jumped from 19.5% of all deal value in Q4 2020 to 23.6%. Meanwhile deals greater than USD 5bn in value, which surged in the latter half of 2020, declined in absolute and relative terms. While such deals represented more than 44.5% of all deal value in the second half of 2020, in Q1 2021 they represented 36.4% of total deal value.
When observing sectors involved with M&A transactions, technology continues to dominate, but transport is the biggest winner of Q1. Technology Media & Telecoms continued its deal-making dominance with USD 344.8.7bn in deal value and 1,237 total deals, making up 29.7% of all deal value. When considering that technology accounted for just 13.4% of all deals in Q1 2020, it becomes obvious that investors have acquired a taste for companies involved with technology.
One should also note that nearly every sector saw increases in deal value, but the Transport sector saw one of the greatest increases YoY. According to Mergermarket, transport deals rose 424.9% reaching USD 66.9bn and 140 deals in Q1 2021 from USD 12.7bn and 170 deals in Q1 2020. Meanwhile, Energy, Mining & Utilities also turned in an impressive 248.3% increase, rising to USD 119.2bn on 373 transactions from USD 34.2bn and 303 deals.
Sector Breakdown of M&A Activity in Q1 2021 by Deal Value (%)