Global Mergers and Acquisitions Reached $3.6 Trillion in 2020

A wave of large deals in the last few weeks of 2020 drove global mergers and acquisitions to the $3.6tn mark in 2020. It’s an impressive rebound of M&A activity in the second half of the year.

Financial Times reports that the 2020 total value of M&A transactions is down roughly 5% from 2019. Nonetheless, this is a dramatic recovery from the first half of the year when the spread of COVID-19 brought deal-making to a stop.

Details of the Second Half Comeback

Companies inked more than $2.3tn worth of global mergers and acquisitions since the beginning of July, which is an increase of 88% from the first half, according to Refinitiv. Activity in each of the third and fourth quarters of 2020 was more than $1tn. This is only the second time since 2008 when transactions were above that level in consecutive quarters.

Although he didn’t “really see an M&A environment,” earlier in the year, Salesforce CEO Marc Benioff pulled the trigger on the acquisition of Slack in December. Under the terms of the $27.7bn takeover, Slack shareholders will receive $26.79 in cash and 0.0776 shares of Salesforce common stock for each Slack share.

Global Mergers and Acquisitions Covid Vaccine

Biden Win Also Fuels Resurgence of Global Mergers and Acquisitions

Dealmakers said activity improved in the second half of the year thanks to the promise of vaccines to treat the coronavirus and the political certainty in the United States after the November win of former vice president Joe Biden.

For example, Asian shares were mostly higher on hopes for additional economic stimulus after the U.S. Congress confirmed Joe Biden as the winner of the presidential election on January 6th. Media announced more than $1.3 trillion of deals in the fourth quarter alone.

Q4 Saw Large Global Mergers and Acquisitions

S&P Global Inc.’s all-stock $39 billion acquisition of IHS Markit Ltd. came immediately after technology megadeals including chipmaker Advanced Micro Devices Inc.’s $35 billion purchase of Xilinx Inc. and Salesforce major acquisition of Slack.

Other notable deals in the final three months of the year included AMD’s $35bn acquisition of rival US chipmaker Xilinx and UK pharmaceutical group AstraZeneca’s $39bn takeover of US biotech group Alexion.

Anu Aiyengar, co-head of global mergers and acquisitions at JPMorgan Chase, told Financial Times, “Outside Covid, this is a good environment for deal-making. The equity markets are high, interest rates are low and equity investors are happy to pay for growth.”

Interestingly, in many of these deals, the acquiring company used its own stock as the main currency, leveraging rising stock markets. S&P Global and AMD are paying for their deals 100% with their own shares. AstraZeneca is paying for about two-thirds of its purchase with its shares, and Salesforce is paying for just 50% of its Slack deal in its own shares.

Diversification Drove Some Deals

Stephan Feldgoise, co-head of global mergers and acquisitions at Goldman Sachs, said several deals were also spurred by companies’ desire to diversify their portfolios. “The balance has shifted where companies now view having increased and diversified scale and a larger balance sheet being as important as focusing on growth opportunities,” he told Financial Times.

Despite an increase in the overall number of American deals, the total value in the region fell 21% to $1.4tn for all of 2020. Outside of North America, Europe was a bright spot for deals compared to recent years. Comparted to the lackluster performance in the Americas, activity climbed 34% to $989bn in Europe and 15% to $872bn in Asia. In fact, the Asia Pacific region returned with the strongest in the second half, and the region may extend its recovery into 2021 with stronger economic growth led by China.