Only once in the last 10 years have companies concluded more deals than in the first half of this year, and this is after numerous transactions were put on ice in the prior-year period, mostly due to the pandemic. The transaction volume also increased substantially in the first half of 2021. These are some of the insights offered by KPMG’s latest M&A half-year report.
In 2020, the coronavirus pandemic caused the acquisition business in the first half of the year to slow down considerably. At that time, many companies questioned or postponed planned deals due to the prevailing uncertainties. Now the tide has turned. Some 256 mergers and acquisitions were announced in the first half of 2021, which corresponds to an increase of around 70 percent compared to the same period of the previous year (first half of 2020: 150 transactions). In the last 10 years, this year’s figures so far have only been topped once, in the second half of 2018, with 269 transactions. A long-term half-year comparison also reveals that 256 transactions is well above the average of 192 transactions since the first half of 2011.
Suspended transactions resumed
The acquisition business increasingly picked up speed as early as the second half of 2020. “Companies resumed the transactions they put on ice due to the coronavirus pandemic, leading to a sharp rise in deal activity. Their confidence boost, which is also reflected in the stock exchange trend, and the favorable environment for financing also fueled the acquisition business,” explains Timo Knak, Head of Deal Advisory and M&A at KPMG.
Apart from the vigorous transaction activity, the significant growth in transaction volume as against the prior-year period is also striking – climbing from USD 23.8 billion in the first half of 2020 to USD 61.3 billion in the first half of 2021. The current half-year volume has therefore is almost on a par with the entire previous year’s figure of USD 63.1 billion.
There have not been any “mega deals” (deals worth over USD 10 billion) so far this year, although the acquisition of GlobalLogic by Hitachi only fell slightly short of this threshold with a deal volume of USD 9.6 billion. In 2020, the 10 largest transactions made up more than two-thirds of the total deal volume.
Highest activity level seen in technology sector, followed by industrial and pharmaceutical sector
As in the prior year, the TMT industry (technology, media and telecommunication) reported the most momentum. Around one-fifth of all transactions (53 of 256) and one-fifth of the transaction volume (USD 13.1 billion out of USD 61.3 billion) were accounted for by this sector in the first half of 2021. In terms of transaction volume, it is important to note that USD 11.6 billion is attributable to the GlobalLogic and UNIT4 transactions. “The TMT industry was able to benefit from the developments initiated, or at least accelerated, by the pandemic. This is also evident in the acquisition business,” says Knak.
Almost one-fifth of the deals (49) were also conducted in the industrial sector in the first half of the year, albeit with a lower volume than in the TMT industry. The pharmaceutical sector also recorded lively M&A activity with 30 transactions. As seen last year, the Commodities (8 deals), Power & Utilities (11 deals) and Chemicals (12 deals) industries produced a lower number of transactions.
Foreign companies catching up
In the first half of the year, Swiss companies acquired considerably more of their foreign counterparts than vice versa. Some 111 transactions (43 percent of all transactions) involved the acquisition of a foreign company by a Swiss firm; in contrast, Swiss companies were purchased by a foreign firm in 74 transactions (29 percent). The increase in foreign buyers of Swiss firms, which is relatively strong in proportion, is remarkable. The share of such transactions in the total deal volume was six percentage points lower in 2020.
With 42 deals recorded, the proportion of domestic Swiss/Swiss transactions declined compared to the previous year, accounting for 16 percent of all transactions (2020: 20 percent). The number of international transactions with Swiss sellers also decreased slightly to 29. Around 11 percent of all transactions therefore fall under this category (2020: 14 percent).
Outlook: M&A environment expected to remain robust
Companies’ current optimism is likely to persist. “I expect deal activity to continue at a high level in the coming months, especially in industries that benefit from the changes caused by the pandemic in the long term. This is coupled with the conditions, which remain positive, and the fact that there are still a few outstanding transactions that have been in the pipeline for a long time now,” forecasts Knak.
Further information, as well as the full study, can be found here: www.kpmg.ch/ma
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