Following a huge decrease in mergers and acquisitions (M&A) in 2020 due to the COVID-19 pandemic, the number of deals surged in the first quarter of 2021, continuing the momentum from the final months of 2020, according to a report by Willis Towers Watson (WTW).
The number of deals rose by 21% year-on-year, with 206 completed transactions in the first three months of 2021, according to Willis Towers Watson’s Quarterly Deal Performance Monitor (QDPM). A total of 58 large deals (valued at least US$1 billion) were completed in the first quarter, up for 44 in the same period last year.
With regard to share price performance, buyers outperformed the market by +13.8pp (percentage points) for deals valued over US$100 million in the first three months of 2021. This is the second-highest quarterly figure ever since the QDPM was established in 2011. The data also maintained the long-term trend for deals outperforming the market since the global financial crisis (+2.3pp).
According to WTW, the recovery is largely due to the North American region, where volumes were up 33% year-on-year. North American acquirers also outperformed their regional index by +16.3pp – the second consecutive quarter the region has achieved a positive performance.
“US-based deals are responsible for much of this remarkable resurgence in activity, which looks set to continue through 2021, fueled by the Biden administration’s US$2 trillion infrastructure and economic stimulus plan, booming stock markets, vast sums of cash to deploy and sustained low interest rates,” said Jana Mercereau, head of corporate M&A consulting, Great Britain, at Willis Towers Watson.
European acquirers also outperformed their regional index by +12pp, while Asia-Pacific did even better at +17pp.
Despite the recovery, Mercereau cautioned companies to exercise caution.
“A shrinking pool of targets and increasing competition, however, could put buyers under pressure to buy more quickly,” she said. “With financial conditions still uncertain, dealmakers will need to resist the temptation to cut corners on due diligence and take the time to review their targets and understand which levers to pull to maximize growth.”