Bain report predicts robust appetite for M&As
Business executives and merger and acquisition practitioners expect M&A activities to contribute to 45 percent of their future growth compared with 31 percent over the past three years, according to Bain's Global M&A Report.
The appetite for M&A is expected to remain robust, with about half of respondents expecting higher M&A activity in their industries this year while half also cite the uncertain economic outlook as the main hindrance to dealmaking.
More than 28,500 deals were signed by corporate acquirers in 2020 with a total value of US$2.8 trillion, down 11 percent and 15 percent from a year earlier.
"In the past year, rapid digitalization has underpinned the recovery by enabling M&A processes to be conducted virtually,” said Phil Leung, senior partner at Bain & Co.
"Government incentive policies, sustained low interest rates, rapidly rising household savings rates, record level of holding funds to be invested and sufficient debt financing funds have boosted asset prices," he added.
More than 90 percent of respondents believe the level of divestiture activity will increase or stay the same in their industries.
The November 2020 survey involved 291 M&A practitioners in the US, UK, Germany, France, China, Australia and Japan, covering companies with an annual revenue of over US$100 million.
Companies feel an urgent need to divert scarce resources to the best opportunities amid increasing industry disruption amid the pandemic, it said.
Technology, media and telecommunications all saw strong market capitalization increases, while the biggest declines were in energy and financial services. There is also an increasing trend to pursue deals aimed to help companies expand into fast-growing markets or gain new capabilities. These kind of deals made up 56 percent of all deals valued at more than US$1 billion, up from 41 percent in 2015.
The number of Asian outbound deals into the Americas and Europe fell by 29 percent year on year in 2020 due to rising scrutiny on cross-border deals and ongoing US-China trade tensions. Global cross-regional deal volume declined for the fifth consecutive year, falling 20 percent.
China acquirers directed 93 percent of their deal spending toward domestic companies, with only around 5 percent going to deals in the Americas and Europe, the Middle East and Africa, a sharp drop from around 11 percent in 2019 and roughly 25 percent in 2016, the peak of Chinese outbound M&As.
Nearly 60 percent of respondents cited the need to localize supply chains to be a significant factor in evaluating deals in the future.
