As the economy recovers and companies put money to work after holding off during the pandemic, dealmaking surged to record levels in the first half of 2021. This was noted in most sectors of the economy, but especially in the technology industry as tech positions for big changes in cloud services and collaboration spurred by a shift to digitalization.
The pandemic has forced the financial services industry to accelerate innovation and illustrate the importance of surpassing the challenges of transacting virtually. Because of this, the dealmaker industry is now better positioned to take advantage of a bright scenario that had started in 1Q21 and remains, spurred by an economic confidence rebound.
Accelerating innovation is a mighty uphill climb when working with outdated tools, a slow compliance team, and with a low-tech or no-tech system. It is frustrating for both dealmaking teams and clients to constantly be on “pause”, spending crucial time awaiting the green light from compliance to pursue the right deal. In an industry that handles complex M&A, multi-million dollar deals, and high-stake mandates, why are we still stuck working with a fragmented and rigid back-end system?
At Finalis we provide support to clients seeking to turbocharge their deal processes with a next-generation solution. Still, wondering if we’re the right fit for you? We’ve got your industry covered.
Where do we stand?
Dealmakers are now operating in a market scenario where progress in the vaccine, and the easing of restrictions, brings optimism regarding oncoming economic prosperity in the shape of low-cost financing and record amounts of dry powder in the capital markets.
Early this year, Colin Ryan, co-head of Americas M&A at Goldman Sachs Group said to Bloomberg: “This is as robust and broad-based an M&A market as I have witnessed in the last 20 years”, and then added, “We are in an environment where assets are scarcer than the available capital right now.”
Show me the numbers…
EY’s analysts state that 1H21 brought unprecedented activity to the broker-dealer space, with global M&A activity hitting an all-time high and deals reaching more than $2.6T during that period (up from $92B yoy). As main takeaways, PwC noted that there was a continuation of the growth in deal size during 1H21, which contributed to record M&A global activity (in deal values in excess of $1T per quarter over the past 12 months).
Specialists highlight that SPACs played a central role as an innovative funding solution for dealmakers and have acted as an important catalyst, as has been the increase in PE investment and corporate acquisitions — particularly those focused on technology assets. With a peak in February and March, SPACs raised $80B during the first half of the year.
According to PwC, Private Equity (PE) deals showed a strong increase during the first six months and it has been brisk (with $1.9T of dry powder). PitchBook forecast that PE fundraising will surpass $330B this year (which would be beyond the $316.9B high-water mark set in 2019).
Regionally, North America led the M&A space in 1H21, where deals worth $1.4T (up from $345B in 1H20), which almost doubled the average seen in the past pre-pandemic five-year average ($784B). Asia Pacific and Europe followed North America with M&A values of $446B (up from $222B in 1H20) and $412B (up from $245B in 1H20) respectively.
Technology, Media and Telecommunications companies accounted for a third of all megadeals in the first half of 2021. Finalis is thrilled to partner with our clients in transactions with companies in this space (e.g., Capital Clarity, Fortitude Advisors, and many others).
- The technology sector’s transactions are leading the way, with a 161% increase in transactions (to $783B)
- Compared with the pre-pandemic average, media and ESG acquisitions are driving sector activity with the largest deals in 2021:
a. The media and entertainment sector reached a $157B worth of deals (up from $16B in 1H20)
b. ESG-related transactions jumped to $96.5B in 1H21 (up from $35.7B in 1H20)
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