Latest trends in Mergers and Acquisitions - Personal Banking
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Latest trends in Mergers and Acquisitions
Latest trends in Mergers and Acquisitions
Latest trends in Mergers
and Acquisitions
Deirdre Kennedy,
Senior Investment Manager, Bank of Ireland Investment Markets
The Covid-19 pandemic has dominated monetary policy support from Central
our lives for over a year, and just Banks, and the rapid development of
as people adapted to lockdowns, highly effective vaccines, investors and
facemasks and hand sanitiser, companies have since regained their
investors and corporations have confidence.
also adjusted to the ‘new normal’. As a result, merger and acquisition
In late-February and early-March of (M&A) activity has strongly rebounded.
2020 investors grasped the severity In the first quarter of this year, $1,300
of the pandemic and corporate deal billion of global deals were agreed,
making ground to a halt. But thanks to which was more than any first quarter
massive government spending, swift since at least 19801.
1
Source: Refinitiv April 2021
Global Announced M&A
No. of Q1 Deals
Q1 Deal value (US$Bill)
Source: Refinitiv Deals Data
2 Classified as Private (Amber)Latest trends in Mergers and Acquisitions
Mega deals SPACS play their part
The United States accounted for more Growth in the number of deals was
than half of all M&A activity with the driven by private equity firms, which
total value of transactions soaring over increased their number of investments
160%. Mergers and acquisitions also by over 50% to 2,800 investments12.
bounced back in Europe and Asia2. SPACS – or Special Purpose Acquisition
Vehicles – also played a significant
Most transactions were in the $5
role in the rebound in merger activity.
billion to $10 billion range3, but there
SPACS are shell companies that
were a number of mega deals including
enable privately held entities to go
Canadian Pacific Railway’s $28 billion
public via a merger with an acquisition
proposal to acquire Kansas City
vehicle rather than an initial public
Southern4. This would be the biggest
offering (IPO). This de-SPAC activity
takeover in Canadian Pacific Railway’s
has attracted some criticism, with talk
history and would create the first US-
of regulatory arbitrage. Companies
Mexico-Canada railroad company5.
going public through IPO usually don’t
In April, Canadian National Railway
provide financial projections because
topped rival Canadian Pacific’s offer
of the serious liability risk associated
for Kansas City Southern with a $33
with these disclosures – the same
billion proposal6. Either deal would
constraints do not apply to SPAC
be the continent’s largest transaction
transactions.
between rail operators since 19997.
SPACS struck over $230 billion of de-
In another transportation deal, Irish
SPAC deals during the first quarter, and
based AerCap agreed to acquire
accounted for 17% of merger activity.
General Electric’s aircraft-leasing
The largest transaction involved
business for $29 billion8. The aviation
electric vehicle maker Lucid Motors
industry has been one of the worst
$24 billion merger with the SPAC
affected by the pandemic over the last
Churchill Capital IV13. A competitor of
year. However the accelerating roll out
Tesla, Lucid’s $169,000 Air model is set
of vaccines has improved the sector’s
to debut later this year14.
prospects.
2
Source: Refinitiv, April 2021
In the financial services sector, 3
Source: Refinitiv, April 2021
4
Source: Bloomberg, March 2021
property and casualty insurer Chubb 5
Source: Financial Times, March 2021
proposed to acquire Hartford Financial Source: Bloomberg, April 2021
6
7
Source: Financial Times, April 2021
Services Group for $23 billion9. 8
Source: Bloomberg, March 2021
9
Source: Bloomberg, March 2021
Source: Refinitiv, March 2021
Looking at the technology industry,
10
11
Source: Bloomberg, March 2021
M&A more than tripled in the first 12
Source: Refinitiv, April 2021
13
Source: Financial Times, March 2021
quarter of 2021 and made up one-fifth 14
Source: Financial Times, February 2021
of overall M&A activity10. This included
Peraton, part of private investment
firm Veritas Capital, acquiring
government services provider
Perspecta for $6.5 billion11.
3Latest trends in Mergers and Acquisitions
Investment banks benefit
Outlook
The surge in M&A activity benefitted While the SPAC boom appears to
the investment banks with JP Morgan have cooled somewhat, merger
Chase, Goldman Sachs and Morgan and acquisition activity has
Stanley topping the league tables. In continued in the second quarter
the first quarter, investment banking of the year.
fees jumped 45% to hit a record $39
In the healthcare sector, life
billion15. Jamie Dimon, Chairman and
sciences and diagnostics firm
CEO of JP Morgan, has hinted that
Thermo Fisher has contributed to
his bank may go beyond providing
the pandemic response by helping
advice on deals, and actively join in the
to scale vaccine production and
acquisition spree, with fintech an area
support testing. The company
of interest.
announced the $20 billion
Working-from-home acquisition of clinical research
- help or hindrance? company PPD in April17.
We think of handshakes ‘sealing
Tech giant Microsoft - a major
the deal’ and might have expected
beneficiary of the working from
travel restrictions to limit merger
home trend that accelerated
activity, but deal makers took to
during the pandemic – has
online conferencing platforms. Some
agreed to acquire Nuance
argue that cutting air miles out of the
Communications for $17 billion18.
equation increased efficiency and
Nuance is a leading provider of
allowed for even more transactions
speech recognition software
to be completed. Indeed, Goldman
to healthcare providers and its
Sachs made the news16 when a group
solutions are used in 77% of US
of home-based junior investment
hospitals.
bankers circulated a slide deck
presentation complaining about their Overall, the environment for M&A
excessive work load. remains very supportive, with a
recovering global economy and
As the pandemic eases and restrictions
low levels of interest rates. In a
are lifted, it will be interesting to see if
competitive world, the need to
long distance deal making continues or
bulk-up to achieve economies
will investment bankers, anxious to stay
of scale, or the desire to own
one step ahead, feel compelled to hit
specific technologies, will remain
the road again.
motivating factors. As the year
progresses more deals may be
arranged in person rather than
over a Zoom call.
15
Source: Refinitiv, April 2021
16
Source: Financial Times March 2021
17
Source: Bloomberg, April 2021
18
Source: Bloomberg, April 2021WARNING: Past performance is not a reliable guide to future performance. WARNING: The value of your investment can go down as well as up. While great care has been taken in its preparation, this document is of a general nature and should not be relied on in relation to specific issues without appropriate financial, insurance, investment or other professional advice. The content of this document is for information purposes only and does not constitute an offer or recommendation to buy or sell any investment/pensions or to subscribe to any investment management advisory service. While the information is taken from sources we believe to be reliable, we do not guarantee its accuracy or completeness and any such information may be incomplete or condensed. All opinions and estimates constitute best judgement at the time of publication and are subject to change without notice. Bank of Ireland is regulated by the Central Bank of Ireland. Bank of Ireland is a tied agent of New Ireland Assurance Company plc for life and pensions business. Life assurance and pension products are provided by New Ireland Assurance Company plc trading as Bank of Ireland Life. New Ireland Assurance Company plc trading as Bank of Ireland Life is regulated by the Central Bank of Ireland. A member of Bank of Ireland Group. May 2021
You can also read
