Global mergers and acquisitions fell to their lowest level in more than a decade in 1H20, as paralyzed bargains were reluctant to explore new opportunities as uncertainty plagued capital markets.
Data compiled Bloomberg shows that the cost of mergers and acquisitions fell by 50% to $ 1 trillion in the first half of the year compared to the previous year, which is the slowest period in transactions since 2012.
The first half in global capital markets was chaos – blockages and a pandemic of the virus damaged supply chains and consumer pressure, which is likely to lead to a recovery phase in a few years. The mood changed by mid-March, only after the Fed, the ECB, the Bank of Japan and the NBK took rescue measures by lowering interest rates to zero and pouring trillions of dollars into world markets to stop extreme volatility.
In periods of extreme volatility, deals are usually pushed into the background, as companies defend their balance sheets to withstand the downturn.
The largest decline in mergers and acquisitions was observed in the Americas, where transaction value fell 69% in 1H20.
While every major industry suffered, the financial sector was better than most. This was supported by Aon Plc insurance broker for $ 30 billion on a proposal by Willis Towers Watson Plc and Morgan Stanley for $ 13 billion for the acquisition of E * Trade Financial Corp. The top three advisers for deals targeting America in 2020 were Morgan Stanley, Goldman Sachs Group Inc., and JPMorgan Chase & Co. – Bloomberg.
The activity of mergers and acquisitions in Europe, the Middle East and Africa during this period decreased by 32%.
Major deals that helped prevent a sharper fall include Advent International and Cinven’s $ 19 billion loan facility for the Thyssenkrupp AG elevator. There has also been a recent surge in activity in the Middle East, including the sale of Abu Dhabi of $ 10.1 billion. In its gas pipeline network, which is considered the largest infrastructure deal of the year. Goldman Sachs, JPMorgan and Rothschild & Co. were the most active EMEA transaction advisors. – Bloomberg
The Asia-Pacific region showed the best results, activity in the field of mergers and acquisitions decreased by 7%.
The technology, media and telecommunications industry reported a 13% increase, driven by the digital division of Indian billionaire Mukesh Ambani, who raised $ 15 billion in investments from companies like Facebook Inc. and KKR & Co. Another significant deal was the sale of a Thai company by Tesco Plc’s Asian business. billionaire Danin Chearavanont worth more than $ 10 billion. The most active transaction banks in the region were Morgan Stanley, HSBC Holdings Plc and JPMorgan. – Bloomberg
Readers can remember global bust of mergers and acquisitions occurred long before the virus pandemic. As we noted in October 2020, “the catastrophic failure of the WeWork IPO hurt capital market sentiment” – probably at the beginning of the early peak.
We also said back then: “The slowdown in M&A deals is an ominous sign that Wall Street banks will see revenue decline in the coming quarter.”
Based on the foregoing, a decrease in activity in the field of mergers and acquisitions this year suggests V-shaped recovery is not possible in the second half of the year,