S&P Global has put Mergers & Acquisitions on their list of 2021 trends shaping sectors. As per their recent Global Market’s Intelligence report, Q2 FY 2021 was the third straight period with the total M&A value suprassing $1 trillion. With this rapid surge and growth in volume, a few trends have begun shaping the mergers and acquisitions sector. As an investment banker, you should care about these because you might find yourself working in M&A advisory. Let’s take a look at three such recent trends impacting private equity M&A:
1. Virtual M&A Deals
Consolidations or buyouts of companies are highly complicated transactions, which not only require an elaborate 9-step process but also extreme attention. To imagine such demanding work be performed online might have been nearly impossible until a few years ago. Yet, after the pandemic, virtual M&As have not only gained prominence but become the preferred mode of conducting these deals.
With almost everyone working from home and limited international travel, all parties’ schedules have been easier to match, making virtual deals a viable option. With remarkable technology, these strategic deals have not only become a popular reality but are also efficient and pragmatic offering companies the ability to save time and resources.
J. Neely, Senior MD at Accenture Strategy predicts, “I don’t think things will go back to the way they were. We will likely have more of a hybrid approach in the future, with a mix of in-person and virtual. Now that companies are seeing the value technology can bring to a deal, it is here to stay.”
2. ESG
If you’ve observed or worked in any business lately, you must have comes across ESG – Environmental, Social, and Governance. These are non-financial metrics to assess a company on its social responsibility beyond profitability. It has, in fact, become a major criteria for global indices and investors to evaluate companies for risks and growth opportunities.
According to Deloitte’s 2022 M&A Trends Survey, more than 70% of the responding organisations mentioned that they incorporate ESG metrics into target valuations and have re-evaluated their portfolio through this lens. ESG evaluation now also forms a vital part of the M&A due diligence process. Nevertheless, more than half of Deloitte’s survey respondents said that the focus on ESG would lead to more M&A deal activity, not less. It was also reported as a key factor defining interest in foreign markets right after access to technology, market expansion, and product or market diversification.
3. Cross-Border Deals
Although the pandemic significantly slowed down international travel, cross-border deals are gaining prominence when it comes to M&As. Deloitte reported that more than two-thirds of respondents expect their companies to increase their interest in foreign markets over the coming year.
This has been made possible with the ability to carry out and close deals virtually. The number one reason behind overseas deals being given preference is access to technology, with the Americas and Europe as geographies of choice.
In 2021, global mergers and acquisitions (M&A) hit record highs in 2021, according to PwC. The number of announced deals were at 62,000 globally in 2021, up an unprecedented 24% from 2020.
Malcolm Lloyd, Global Deals Leader, Partner at PwC Spain said, “We’ve seen deals lead the way to economic recovery—looking forward, I expect M&A will continue to play a pivotal role for companies navigating technological disruption and increasing pressure from stakeholders to unlock value in their companies and portfolios.”
Conclusion
Mergers and Acquisitions have always been the highlight of the investment banking sector. With the current revolutionising and innovative trends, interest is further heightened in this domain. If you are keen to work in investment banking or specifically in M&As, you must understand how the trends around virtual deals, ESG, and massively increasing globalisation affect M&As. This will help you stay ahead of the curve as an investment banker. To understand the M&A process in further detail, you can opt for this comprehensive introductory course on investment banking.
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