Trends in M&A activity: Global deal value and volume reaching an all-time high at the end of Q3 2021

Johannesburg Corporate Partner, Patrick Leyden, was recently interviewed on Business Day TV and provided insight into global and domestic M&A activity as both deal value and volume approach all-time highs in 2021.

Patrick provided an overview of key factors driving global and domestic M&A and highlighted that:

• The global M&A market reached record levels towards the end of Q3, primarily due to investors having a better understanding of the economic uncertainty around COVID-19 and institutions looking to capitalise on the concomitant growth opportunities. In addition, there is an abundance cheap capital in the market due to low-interest rates as well as an increased interest in private capital.
• Noticeably over the last eighteen months (more so internationally, than domestically) is the listing of a significant number of special purpose acquisition companies ("SPACs"). From Q1 to Q3, SPACs have reportedly raised more than $100 billion worldwide^[1] which must be used to make mandated acquisitions within a limited period of time. SPACs are also competing with traditional corporate capital and private equity firms for opportunities which has, in some cases, resulted in inflated acquisition prices (and thus deal value).
• Africa has experienced an approximate 16 per cent increase in deal value growth year-on-year which is lagging behind other regions such as Europe (up by 34 per cent), the USA (up by 40 per cent) and the Asia-pacific region (up by 45 per cent)^[2]. While Africa is behind the international trend, it may well close this gap relatively quickly as investor confidence returns to emerging markets.
• South Africa has seen a significant resurgence in M&A activity this year. While analysts suggest that, at the end of Q3, deal value has more than doubled year-on-year, this is of course coming off a record low base of activity in 2020.
• The UK, Europe, USA and China remain significant contributors to foreign direct investment into South Africa and Africa more generally. Many South African domiciled public companies have been focused on diversifying domestic holdings with 29 deals into the rest of Africa, 20 in Europe and 20 in the United Kingdom.^[3]
• This global momentum is predicted to continue into 2022. Domestic M&A is likely to follow suit but the effect of the recent civil unrest, return to load-shedding and increased government intervention on deals, remains to be seen.

Herbert Smith Freehills will be releasing its annual M&A Global outlook in January 2022.

For more information, please contact Patrick Leyden.

[1] Ken Shimokawa, S&P Global Market Intelligence: Global Capital Markets & SPAC Activity – H1 2021,13 August 2021.

[2] Lawrence Choy, S&P Global Market Intelligence: Global M&A By the Numbers: Q3 2021, 25 October 2021.

[3] Marylou Greig, DealMakers South Africa M&A Analysis Q1-Q3 2021, 9 November 2021.