M&A market ‘supercharged’, may reach a record of 6 trillion USD by the end of the year

M&A market accelerates, may reach a record of 6 trillion USD by the end of the year

The value of M&A deals globally could reach $6 trillion by the end of this year as businesses continue to take advantage of cheap capital and the opportunity to recover from the Covid-19 pandemic, according to KPMG.

CD&R (USA) private investment fund has just won a $9.5 billion contract to buy Morrisons supermarket chain in the UK. Photo: AFP

According to Refinitiv data, the value of global M&A deals so far this year has exceeded $4.3 trillion, approaching the record of $4.8 trillion set in 2015.

This development marks a leap of the M&A market this year, compared with $3.6 trillion in 2020. According to Stephen Bates, Head of Trading at KPMG in Singapore, “pent-up energy” comes from fundraising. which was active before the pandemic, so far there is no sign of slowing down.

This expert assesses, the M&A market now speeding up totality. “There’s a lot of pent-up energy from raising capital [trong năm 2018 và 2019] but that didn’t happen in 2020. So that ‘dry food’ funding is now on the way,” added Mr. Stephen Bates.

In terms of sectors, technology, financial services (fintech), industrials, and energy accounted for the majority of M&A deals this year and were largely led by companies, private equity, and public special purpose acquisition company (SPAC).

SPAC is the model that has become popular. This type of company does not carry out commercial activities, but is established solely to raise capital from investors for the purpose of acquiring one or more existing businesses. They raise capital in an initial public offering and use that money to merge with a private and publicly listed company.

Stephen Bates said the US still accounted for the majority of M&A deals this year, although the European market recorded the fastest growth at 50% year-on-year. In addition, M&A deals in Asia also grew by 20% over the same period last year.

Low interest rates and stagnant growth amid the Covid-19 pandemic forced businesses to look for alternative growth drivers and M&A emerged as a strong impulse since the beginning of this year.

The results of a survey by KPMG in September showed that 8 out of 10 (about 86%) CEOs said that “inorganic growth” will be their main source of growth in the next 3 years. The term “inorganic growth” includes activities: M&A, joint ventures and strategic alliances.

“We’re in a fairly low-growth environment and that means CEOs are looking to other markets to develop products, markets, and capabilities,” said Stephen Bates.

Mr. Bates predicted, xThis trend will continue until the end of this year, when M&A transactions reach nearly 6 trillion USD and maybe the time will shift to early 2022.

“With interest rates continuing to stay low, the positive sentiment remains… That rally [sẽ] continue. I think we’ll see that flow in the first quarter of next year,” said Stephen Bates.