Conditions Ripe for Already Resilient US M&A Activity to Accelerate in 2021 and Beyond
– Stronger than expected rebound in US M&A value since July 2020 likely to continue into 2021.
– Despite a pandemic-fueled M&A decline in the first half, 2020 ranks 6th for largest US transactions’ value in the post global financial crisis 2007-2008 period.
– COVID-19 has accelerated the urgency for digital transformation, a key driver for deal-making as businesses look to grow and pivot operating models post-pandemic.
While 2020 proved to be a tumultuous year for mergers and acquisitions (M&A), the second half of the year is seeing one of the largest rebounds in M&A to date. The increase in year-over-year (YoY) deal value in the US since the beginning of Q3 is expected to continue into 2021 as companies position themselves for improved economic activity due to both the presence of a COVID-19 vaccine and more geopolitical certainty after a decisive US election.
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According to EY analysis, with an overall value of $1.4 trillion, US M&A in 2020 is tracking below 2019’s value of $1.8 trillion, but still ranks sixth for deal values in the post-global financial crisis of 2007–2008 period. The US remains the most active deal-making nation globally, much of which can be attributed to large-scale technology deals driving the M&A momentum. During 2020, the technology sector recorded 3,171 deals valued at $447 billion, accounting for 32% of the total deal value. As a strong appetite for product portfolio enhancement and investment in R&D positions continues, the technology sector appears ripe for continued deal-making activity in the months ahead.
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Technology wasn’t the only sector that saw a flurry of M&A activity during 2020. Sectors such as financial services, with 658 deals valued at $170 billion (up 13% YoY from Dec. 1, 2019 – Nov. 30, 2020), and media and entertainment, with 151 deals valued at $87 billion (up 8% YoY from Dec. 1, 2019 – Nov. 30, 2020), were the most prominent(EY ).
The economic impact of pandemic-induced lockdowns demonstrated the vulnerability of many previously strong sectors, such as industrials (down by 36% at $97 billion compared to the same time period in 2019) and consumer (down by 38% at $43 billion). And although some sectors, such as life sciences, saw a decline in YoY deal value (down 52% at $191 billion compared to the same period in 2019), the overall number of deals recorded increased as several sector companies capitalized on the opportunities created by the pandemic and engaged in strategic deals(EY).
