Global and Italian M&A Trends FY20

Global M&A activity accelerated in the second half of 2020. With increasing valuations and so much capital in play, investors must pay close attention to value creation fundamentals, in order to accelerate on execution, mitigating the risk of a fast due diligence process

After the trough of Q2-20, dealmaking rebounded from June 2020 and remained strong through to year-end across all regions, reducing the overall contraction in global deals activity to -3% in volumes and -9% in values.

In Italy, the overall M&A activity reduced in terms of number of transactions (-22%), with an increase in deal value (up to $70bn) boosted by large announced tickets such as Nexi/Nets ($7.4bn), Nexi/SIA ($5.3bn), CVC/Advent/FSI - Serie A ($2.0bn), Moncler/Stone Island ($1.5bn). The technology and telecom subsector ("TMT") has seen the highest growth in both deal volumes and values, followed by Consumer Markets and Financial Services.

Companies and financial investors anticipating the economic fallout from the global coronavirus pandemic have an accumulated war chest of more than $7.6 trillion in cash and marketable securities and interest rates remain at record lows. Pent-up demand may kick in as the availability of vaccines increase CEO, investor and consumer confidence. For companies facing imminent distress, consolidation may be inevitable. For others, dealmaking may be the best, and fastest, way to fill urgent gaps in the skills, resources and technologies they need to create value down the road.

By many indications, the next 6 to 12 months could be busy ones for mergers and acquisitions, with both opportunistic as well as transformational M&A, polarized on sectors which were able to ride the crest of the crisis (fintech, digital, healthcare). On these sectors we expect an increase in valuations, driven by competition, balanced by a decline in volumes and prices on assets operating in industries most negatively affected by COVID-19 or which have not been able to adapt their business models to the structural changes imposed by the “new normal” (fashion, food-service, tourism). In these sectors we expect an increase in restructuring activity, in particular in those sub-sectors which not benefited from subsidies and, generally speaking, at the conclusion of the extraordinary Government measures.

Following a turbulent year in dealmaking, 2021 is likely to be marked by growing polarisation in asset valuations, acceleration of deals in digital and technology, and increasing attention to environmental, social and governance (ESG) matters.

Headwinds do remain. Ongoing waves of COVID-19 continue to trigger lockdowns. High unemployment is likely to moderate demand for products and services. Global trade tensions, regulatory pressures, the post-Brexit in Europe and the presidential transition in the US create uncertainties at global level. And the economic recovery will likely be uneven across different sectors and regions.

The fundamentals for successful dealmaking haven’t changed. Companies with clear strategies, identified acquisition targets and relationships with their executives are well placed to accelerate on acquisition processes and extract the highest value from the deal in the medium term, mitigating the risk of a fast due diligence process

M&A Trends | Global

At global level, the sectors which recorded an overall increase in terms of both volumes and value have been Financial Services (+6.8% in value) and Telecom, Media and Technology, which recorded a growth in both volumes and value (+11% and 26% respectively) and an increase in multiples. Healthcare has been growing in volumes (+4%), but is more volatile in value, as impacted by few mega-deals in FY19 (deal value higher than $5bn).

M&A Trends | Region

All the regions recorded an acceleration in M&A activity since Q3-20, with a peak in the last quarter in Asia-Pac and in Italy, within EMEA. The increase in deal value is connected to the number of mega-deals (with a deal value higher than $5bn), passing from 27 in 1H-20 ($266bn) to 57 in 2H-20 ($688bn) at global level.

Corporate vs Private Equity | Global

At global level, deals announced by corporate investors remained stable at c. 72% of total volumes until Q3-20, then declining to 67% in Q4-20, partially balanced by an increase in those promoted by financial investors. Cross-border deals increased in both volumes (from 11,987 a 13,311) and value (from $903bn to $931bn), with a peak in 4Q-20.

	FY18	FY19	FY20	Delta FY20-19
Total Deal Volume	51,404	50,006	48,436	-3.1%
Corporate	74%	72%	69%	(2,936)
PE	26%	28%	31%	1,366

	FY18	FY19	FY20	Delta FY20-19
Total Deal Value ($m)	3,643,679	3,398,762	3,082,042	-9.3%
Corporate	69%	71%	63%	(449,737)
PE	31%	29%	37%	133,018

M&A Trends | Italy

In Italy, given the smaller size of the market, the presence of mega-deals drives significant fluctuations in deal value, with a volatile quarterly trend.

TMT is the only sector marking an increase in both deal volumes and value (deal value of $25bn in 2020, +317%) driven by KKR/Telecom, Macquarie/Open Fiber, Bain / Engineering deals. Consumer Markets increase in deal value (+181%, up to $8.5bn) is boosted by Permira / Golden Goose acquisition and Moncler / Stone Island combination. Financial Services growth (+75%, up to $28bn) includes Nexi/Nets, Nexi/SIA, CDP Euronext/Borsa Italiana deals.

Corporate vs Private Equity | Italy

In Italy, deals announced by corporate investors passed from respectively 67% of total volumes and 75% of total deal value in FY19 to 63% in volumes and 39% in value since Q2-20, partially balanced by an increase in those promoted by financial investors. Cross-border deals declined in volumes (from 546 to 391), but increased in value (from c. $21.6bn to $36.9bn) driven by Euronext-CDP Equity-ISP acquisition of Borsa Italiana ($5.1bn), Macquerie / Open Fiber ($3.1bn) and the 33.2% acquisition of Infrastrutture Wireless Italiane SpA ($3.4bn) from a pool of funds led by Ardian.

	FY18	FY19	FY20	Delta FY20-19
Total Deal Volume	1,364	1,465	1,149	-21.6%
Corporate	70%	67%	66%	(228)
PE	30%	33%	34%	(88)

	FY18	FY19	FY20	Delta FY20-19
Total Deal Value ($m)	75,727	44,852	71,325	59.0%
Corporate	60%	75%	41%	(4,174)
PE	40%	25%	59%	32,042

_{Explanatory note}

_{PwC analysis is based on Refinitiv database including both closed and announced deals, allocated by quarter on the basis of the announcement date. Deal value is expressed in $ millions and available for c. 30% of global transactions and 25% of Italian deals, which according to our estimates covers c. 80% of Italian M&A market in value.}