Companies across the globe clinched almost $700bn worth of mergers and acquisitions during the first two months of the year, as consolidation in the technology sector fuelled huge deal activity.
In February alone, deals totalling $405.3bn were announced globally, an increase of 45% compared to the same month last year, according to data from Refinitiv. That is the highest February on record since the financial data provider’s records began in the 1970s.
The burst of activity takes the value of M&A announced so far this year to $698.7bn, 56% more than the same period last year and a year-to-date total only exceeded twice in the years 2000 and 2018.
The technology sector dominated deal activity for the seventh month in a row, with $87bn worth of deals struck in February as cash-rich companies embark on big acquisitions in two of the sectors which have benefited increased investment during the coronavirus crisis.
Notable deals this year include Japan’s Renesas Electronics all-cash $6bn bid for UK-based Apple-supplier Dialog Semiconductor and UnitedHealth Group’s $8bn purchase of ChangeHealthcare to bolster its technology business in January.
Special purpose acquisition companies, or SPACs, are shell companies that use the proceeds from going public to buy another company. Those have also surged to a record $150.6bn so far this year, which has boosted the value of dealmaking.
Deep-pocketed private equity groups have also stepped up the pace of acquisitions this year as they look to capitalize on the abundance of cheap financing available to carry out leveraged buyouts.
“We expect to see a lot of pent-up demand returning to the market. Add to that soaring levels of dry powder and robust markets and 2021 is shaping up to be incredibly busy,” said Hugh MacArthur, global head of Bain & Company’s private equity practice.
Unspent private capital overall, including that committed to venture, growth and infrastructure funds, has grown in stair-step fashion since 2013 to almost $3tn, with around a third of it attributed to buyout funds and SPACs, Bain & Co said in a 1 March statement.
But while M&A in the Americas has reached a 20-month high, European activity was down 37% in February, compared to the same month in 2020, despite a slew of bid for UK companies in recent weeks.
M&A activity in Asia-Pacific dropped to a nine month low.