Even in the pre COVID-19 “normal” times, M&A was a long and complicated process which included many risks. To see how global M&A market performed in the year of the pandemic, we bring you an overview of Mergermarket’s global M&A report for 2020.
As the clock stroke midnight many investors were hopefully looking towards the future. However, even as we leave 2020 behind us, we are left with the impact it had on 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. The USD 1.2tn worth of deal values announced in the final quarter was the highest quarterly value since Q2 2007, according to Mergermarket.
Meanwhile, the first half of the year saw an unprecedented drop in deal value of -49.3% YoY with global deal value amounting to USD 966bn. The reason, of course, was the raging pandemic which put many acquisition plans on hold, or even led to their complete abandonment. So putting together USD 966bn in 1H with the record of USD 2.2tr in 2H, we arrive at USD 3,163bn showing that global deal value declined by only 6.6% YoY. When looking from mergers and acquisitions perspective, 2020 was not such a bad year. It was almost on the level of 2016 (USD 3,203bn) and 2017 (USD 3,196bn), which came after a record M&A year of 2015 (USD 3,876bn).
Breakdown of Global M&A Deal Value (USD bn)
Even though activity on M&A markets came to a standstill, activity on debt and equity capital markets picked up. In addition to a significant volume of high yield bond issuances and secondary equity offerings, special purpose acquisition companies (SPAC) became the star of 2020, particularly in the US. A total of 255 SPACs were launched in 2020, raising USD 82.1bn, compared to USD 13.5bn across 73 listings in 2019, according to Dealogic data (to read more about SPACs in 2020 click here). However, not all companies could find the needed capital. As a result insolvencies and bankruptcy filings climbed steadily through the year – Debtwire Restructuring data show a 33% YoY increase in US filings, from 240 to 319.
Regional Activity
The biggest gainer in 2020 was Asia (including Japan), which saw its global market share rise in both value and volume (up by 7.4% and 2.2% respectively). Meanwhile, Europe also saw its share of global deal value increase to 26.8% (from to 23.7%) while registering a small decline in overall deal count. On the flip side, North America, which had seen its global market share steadily rising over the years, saw its deal value decline substantially (from 50.5% to 41.9%) while remaining the same on deal count (33.3%).
If there was a “winner” in 2020, it was mega deal professionals. According to Mergermarket, 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.
Sector Overview
Turning our attention to the most popular sectors involved in M&A transactions last year, on the back of the trends magnified by the pandemic, Technology, Media, & Telecommunications climbed 56.8% by value compared to the previous year, from USD 543.4bn to USD 851.8bn. Note that this accounted to more than a quarter of overall global activity. Volume on the other hand declined slightly to 3,943 deals. Looking only at Technology segment it grew 47.4% YoY to USD 590.2bn of deal value, making it the most important deal making segment amounting to 19% of total deal value. 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. Finally, Industrials & Chemicals rounds up the three best performing sectors in 2020, showing however a 27.1% drop to the previous year – from 3,791 to 3,023 transactions.
Breakdown of Global M&A Deal Value by Sector (USD bn)
The deals account for 1.8% of the company’s trailing 12m consolidated sales.
Ericsson Nikola Tesla has announced that they have signed new deals with the Ministry of the Interior and the Ministry of Justice and Public Administration of the Republic of Croatia worth approximately HRK 35m in total.
In collaboration with companies Securitas Hrvatska and Hidraulika Promet, Ericsson Nikola Tesla and the Ministry of the Interior signed a contract related to continuing the implementation of “Green Borders” project. This project is aimed at establishing the surveillance of the state border in line with Schengen rules.
The collaboration includes the equipping of the Ministry of the Interior’s off-road vehicles with highly sophisticated video equipment which is connected to both the central national center and local centers for state border surveillance. In this area, in collaboration with Securitas Hrvatska, a contract for stationary systems was signed with the Ministry of the Interior as well. This contract is related to equipping additional locations with video equipment and software whose functionalities are in line with Schengen rules.
Ericsson NT and the Ministry of Justice and Public Administration of the Republic of Croatia signed a contract related to the services of improving, finishing and upgrading GAPA IT system as well as educating its users. The contracted activities include the development of an IT system which will provide support to process and quality management in public administration. The project aims to use services to improve the existing Single application system for the monitoring and control of administrative procedures (GAPA IT system) which collects data in order to improve the monitoring of administrative procedures and making decisions in public law bodies as well as removing unnecessary administrative procedures.
To put things into a perspective, the aforementioned deals account for 1.8% of the company’s trailing 12m consolidated sales.