As the world emerges from the global pandemic and an unprecedented disruption of business, mergers and acquisitions activity has been robust. Companies and investors have been on an unprecedented shopping spree throughout 2021. Some notable brands have changed hands, and many smaller companies are finding themselves attractive targets to be acquired.
According to the Financial Times, the pace of deals in 2021 was very brisk, even throughout the summer. The traditionally slow month of August accounted for roughly $500 billion in M&A deals, up from $289 billion in the same month in 2020 and $275 billion in August 2019.
Reuters reported in August that a yearly record for global M&A deals would be set. By mid-August, the value of announced deals was nearly $3.6 trillion, surpassing the total of $3.59 trillion for the entire year of 2020
Why a Global M&A Boom, and Why Now?
- Part of the reason for this boom in M&A activity across the globe is the investor confidence based on the expectation that the pandemic is fading into history. Fueling the surge are factors including low interest rates and trillions of dollars from private equity groups being deployed. Major drivers of M&A activity are SPACs, or special purpose acquisition companies. As the name indicates, these companies exist to be a fund that can buy companies, which are then brought public. SPACs, which are sometimes called “blank check companies,” have become wildly popular.
- By mid-July 2021, SPACs had raised $111.7 billion, more than the total of $83.4 billion raised in all of 2020. With all that money piled up to spend on acquisitions, it’s likely the pace of M&A will not be slowing.
- Indications are that the pace of dealmaking could continue for at least the next year or two. In an interview with CNBC, Andrea Guerzoni, a global vice chair at Ernst & Young, was confident and argued against concerns that SPACs were causing reckless valuations. Guerzoni contended the activity in M&A was “justified by the macroeconomic situation.”
- The activity in M&A is spread across many sectors, with Fintech and Healthtech leading the way.
Could Regulations Slow the Momentum?
- An issue which may attract regulatory attention in the next few years are the many acquisitions of smaller tech companies by some of the giants. Over the past decade, companies including Facebook, Google, Microsoft, Apple, and Amazon have bought more than 600 smaller companies.
- For the most part those acquisitions haven’t attracted much scrutiny from regulators, as each individual acquisition didn’t draw the attention of regulators. But what has been termed “serial acquisitions” are beginning to draw more attention.
- The Justice Department and the Federal Trade Commission issued a joint statement on July 9, 2021, saying federal regulators would review the current merger guidelines to see if they have been “overly permissive.” The anticipated review of merger guidelines will not happen overnight, of course, but changes in how companies can legally make acquisitions could be a concern in the long term.
What are some newsworthy global M&A deals?
- A global trend which has surprised some observers is a rush for investors to buy up British companies. Years of Brexit uncertainty and disruptions from the pandemic have deflated the value of British companies, and investors are essentially shopping for bargains.
- A few deals in the media sector have caught the attention of the public. In August the German publishing giant Axel Springer agreed to buy Politico. A week before the Politico deal was announced, The Hill, another Washington publication, was purchased by the Nexstar Media Group, which primarily operates local television stations. In the field of show business news and gossip, Fox announced in early September that it would be buying TMZ, a brand known for its tabloid style.
- A significant recent deal in tech was the news in September 2021 that Intuit, makers of popular finance software, would acquire Mailchimp, a company widely known for its email marketing services. The deal, which puts the price of Mailchimp at about $12 billion, was strategically attractive. Intuit intends to incorporate Mailchimp’s digital marketing with its popular Quickbooks program, which could help small businesses manage customers.
Is Your Company an Attractive Target?
Yes, your company could be an attractive target for acquisition, especially with the current M&A boom. More notable deals, potentially blockbusters, are expected in the coming months, and there's a good possibility that potential buyers will be looking to acquire small businesses.
What are the key tips for having your business acquired?
If you’d be interested in having your business acquired, there are some basic tips. First of all, it’s important to show you have a senior management team with demonstrated success. It’s important to show diversification, both in geography and products. Having virtual locations is always an attractive feature. Have your finances in order and optimize your business. And, with travel coming back, it’s important to circulate again, attend conferences and learn from your peers.
