No Match Found
LONDON, 20 July 2021 – The increasing need for technology and other innovative capabilities, combined with an abundance of capital raised by SPACs and PE, is driving intense competition and premium valuations on M&A deals, according to PwC’s Global M&A Industry Trends: 2021 mid-year outlook.
The analysis examines current global deals activity and incorporates insights from PwC’s deals industry specialists to identify the key trends driving M&A activity, and anticipated investment hotspots for the remainder of 2021 and into 2022.
The first six months of 2021 saw record levels of dealmaking both in terms of deal volumes and values, notably setting a record growth of global deal values in excess of US$1 trillion per quarter over the past 12 months. Fresh capital inflows led by SPACs have been an important catalyst, plus an increase in PE investment and corporate acquisitions—particularly focused on technology assets.
Brian Levy, Global Deals Industries Leader, Partner, PwC US, said: “The pursuit of strategic advantage is powering deals. SPACs are set to challenge both corporate and PE buyers for the best assets, pressuring dealmakers to prioritize revenue growth over cost synergies to justify high valuations and to create greater value for their organisations.”
The leveraged buying power of SPACs
SPACs, in particular, catapulted the megadeals — deals with values over US$5 billion — announced during the first half of 2021. A third of announced megadeals in the last six months had a SPAC buyer and an outsized proportion of those (almost 90%) involved bolstering technology capabilities.
A record 274 new SPACs were listed in the first quarter, raising over US$80 billion during the first half of 2021, more than the amount raised during the whole of 2020. While the creation of new SPACs has slowed, there remain almost 400 existing ones that have yet to identify an acquisition target. PwC analysts estimate that these SPACs possess nearly a half trillion dollars in buying power, with existing capital and leverage combined, for M&A over the next two years — the bulk of it to be invested by the end of 2022.
In addition, PE fundraising has been brisk, and the share of deals with PE involvement increased from 27% in early 2019 to 36% in the first half of 2021. The US$1.9 trillion in dry powder capital from PE, combined with the buying power of SPACs, is creating a level of urgency to find a target which is likely to keep competition stiff and M&A values high in the second half of 2021 and beyond.
M&A activity rebounds across industries
As industries continue to navigate the effects of COVID-19 on the economy, dealmaking in 2021 is focusing on recalibrating strategy in the wake of the pandemic. This has led to a trend of corporates using M&A to acquire capabilities they don’t have—often in technology— to enhance existing capabilities and reinforce their competitive advantage.
Notable industry highlights include:
These trends illustrate how companies are looking for capability-led deals to create or preserve value amid the myriad of factors influencing target selection, due diligence, valuations and integration that has disrupted the traditional M&A playbook. Successful dealmakers will need to reinvent the playbook and consider a broader spectrum of inputs—not just to maintain a competitive advantage but to be ready for what’s coming next.
PwC’s Global M&A Industry Trends is a semi-annual analysis of global deals activity across six industries — consumer markets (CM), energy, utilities and resources (EU&R), financial services (FS), health industries (HI), industrial manufacturing and automotive (IM&A), and technology, media and telecommunications (TMT).
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Director, Global Corporate Affairs and Communications, PwC United Kingdom
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