Ongoing COVID-19 restrictions across the globe did not dampen appetites for deals in the first quarter of 2021. Overall value more than doubled year on year to US$1.2 trillion, the highest total of any first quarter on Mergermarket record (since 2006). Volume ticked up by a more modest 6% over the same period to 5,063 deals, signaling a focus on the upper end of the market—there were 47 transactions worth US$5 billion or above, more than any quarter since Q2 2007.
US value more than doubles pre-pandemic levels
Following an impressive comeback in H2 2020, the US continued its dealmaking momentum in the first quarter. A total of US$563.2 billion changed hands, more than doubling the US$213.6 billion recorded in Q1 2020.
A string of big-ticket deals underpinned this impressive performance, the largest being Dutch aircraft leasing company AerCap’s US$31 billion acquisition of GE’s aircraft leasing unit, GE Capital Aviation Services LLC (GECAS), announced in March.
Telecom pushes TMT to top of table
The technology, media and telecommunications (TMT) sector continued to generate the most deals and the highest value by sector globally. A total of 1,237 deals valued at US$344.8 billion were announced in the first quarter—over a threefold increase compared to Q1 2020’s total of US$99.4 billion—while volume over the same period rose by 21%.
This impressive increase in deal value was boosted by some sizeable telecommunications deals, including Canada-based Rogers Communications’ US$20.4 billion takeover offer for regional rival Shaw Communications, announced in March.
Another notable telecom deal in Q1 was Telefonica’s sale of telecom tower unit Telxius to wireless infrastructure provider American Tower Corp. for US$9.4 billion. The deal, which will enable American Tower to expand its position in the European market, is the latest in a wave of consolidation in the tower infrastructure market. In February, Spanish telecom provider Cellnex agreed to acquire French tower unit Hivory from KKR and Altice for US$6.3 billion.
Energy transition fuels utilities shake-up
The energy, mining and utilities (EMU) sector also recorded an impressive increase in deal value year on year. A total of US$119.2 billion announced in the first quarter was more than triple the US$34.2 billion recorded in Q1 2020. Deal volume grew 23% to 373 transactions.
The largest deal in the sector targeted the utilities industry: UK-based National Grid’s US$19.8 billion takeover offer for regional electricity operator Western Power Distribution, announced in March. The transaction reflects major shifts toward energy transition, as companies increasingly move away from carbon-based fuels to reduce their greenhouse gas emissions.
SPAC boom takes M&A world by storm
According to Dealogic, 256 SPACs listed globally in 2020, raising a total of US$83.3 billion, compared to 73 listings raising US$15.5 billion in 2019. And more SPACs have debuted already in 2021 than debuted in all of 2020.
The largest SPAC merger to date took place in the first quarter: The US$11.8 billion merger between US-listed Churchill Capital Corp, controlled by veteran dealmaker Michael Klein, and Lucid Motors, a developer of luxury electric vehicles. Once the transaction is completed, Lucid will become a listed company on the New York Stock Exchange.
Another SPAC deal fueled by the shift to clean energy was the US$7.2 billion merger between NASDAQ-listed RMG Acquisition Corp and India-based renewable energy company ReNew Power. Demand for renewable energy in India is growing as the country looks to reach its target of 450 GW of renewable energy capacity by 2030.
The gradual global roll-out of COVID-19 vaccines, as well as a brighter macroeconomic outlook, appear to have boosted dealmaker optimism in the first quarter. The trend is likely to continue, and with greater certainty in the market, confidence could also return to the middle market, further boosting deal activity.