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New heights: US M&A H1 2021

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US M&A set a new record for value in H1 2021—and nearly surpassed the full-year figure for 2020

A year of historic highs and rapid change

US M&A surged to record levels in the face of pandemic-related challenges and potentially dramatic regulatory shifts

We are just heading into August, but it is already safe to say that 2021 is a historic year for US M&A. Deal value rose to a new high of US$1.27 trillion in H1 2021. This was a 324 percent increase compared to H1 2020—and was virtually equivalent to the total value recorded in all of 2020.

This torrent of deals was the result of a perfect storm of activity on the part of strategic, PE and SPAC dealmakers. The pandemic drove many corporates to offload non-core divisions and acquire digital capabilities. Corporates that thrived during the pandemic used M&A to consolidate gains. PE firms strove to deploy their massive troves of dry powder. And SPACs searched for opportunities to invest the record levels of funds they raised.

The election of Joe Biden as President significantly reduced political uncertainty that may have dampened activity in 2020 and this spurred dealmaking in 2021. However, the administration's policies could also complicate dealmaking.

The Biden Administration is taking vigorous steps to reshape antitrust policies and practices in the US. In July, the President issued an Executive Order to promote competition and lower prices throughout the economy through increased antitrust enforcement. These efforts are likely to intensify during the run-up to the US midterm elections in November 2022. The effects were already visible in the recent decision by Aon and Willis Towers Watson to call off their merger, which they first announced in March 2020. The deal would have created the world's largest insurance broker, but the Department of Justice opposed the deal on the grounds that it would eliminate competition, reduce innovation and lead to higher prices.

CFIUS has shown that it will mostly continue with the more aggressive approach to evaluating deals for national security concerns that was established by the previous administration. And with the appointment of Gary Gensler as Chair of the Securities and Exchange Commission, the administration signaled it will take a more aggressive approach to securities law enforcement.

There are a number of other looming risks as well. The possibility of rising inflation and the end of government support measures related to the pandemic could shock the market. And dealmakers are concerned about potentially frothy valuations.

But perhaps the greatest variable remains the uncertain trajectory of the pandemic. Though the US was on a course of increasing optimism as vaccines were rolled out, recent concerns about the Delta variant of COVID-19 have raised questions—and exacerbated political divisions—about how quickly economies should open up.

Despite these challenges, the outlook for dealmaking remains very positive. US GDP forecasts are upbeat, stock markets are at historic highs, and interests remain low. Moreover, the Biden Administration's economic stimulus efforts and ambitious plans for energy transition and infrastructure development will inject large sums of capital into the economy. We expect US M&A to remain very active in the second half of 2021.

 

US M&A hits record highs

The US enjoyed record levels of M&A activity in H1 2021, as dealmakers made up for lost time caused by pandemic-related disruptions

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Private equity deal activity forges ahead

US private equity has rallied following pandemic lockdowns, thanks to adaptations to remote deal processes and record dry powder

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Sectors

Sector overview: TMT and healthcare continue to dominate

TMT M&A tops the sector charts again

electronic engineering

Oil & gas M&A rebounds after pandemic lows

After a year of volatility, the oil & gas industry has stabilized and M&A activity has resumed

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Technology dealmaking goes from strength to strength

Technology M&A activity is thriving in 2021 as dealmakers continue to turn to the sector in search of assets with high-quality earnings and growth prospects

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Healthcare displays strong deal activity post-pandemic

The value of healthcare M&A in H1 surpassed pre-pandemic levels

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Consumer and retail M&A picks up speed

Deals in the consumer and retail sector show signs of recovery as consumer spending
rallies post-pandemic

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Power & renewables M&A soars on back of green policies

The power and renewables industry is positioned for a sustained period of strong deal
activity as the US focuses on hitting net zero carbon emissions by 2050

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Real estate sees welcome revival in M&A in 2021

M&A value among real estate firms quadrupled year-on-year in H1, after a tough 2020

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Infrastructure M&A forges ahead, even before government boost

After a pause, investment in infrastructure has ballooned, even before the Biden administration's US$1 trillion-plus plan is passed

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In focus

US dealmaking braces for more challenging antitrust environment

After campaigning for the presidency on a platform that included more aggressive antitrust enforcement, Joe Biden has taken early steps to honor those pledges

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CFIUS set to continue careful scrutiny under Biden Administration

President Joe Biden's approach to the national security risks posed by foreignbacked M&A may differ in style from his predecessor, but not in substance

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Reverse break-up fees emerge in response to deal terminations

Even as economies pick up, dealmakers have maintained focus on managing the risk of broken deals

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SEC to take tougher line on enforcement

New Securities and Exchange Commission Chair Gary Gensler has put scrutiny of
SPACs and private funds at the top of his agenda

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Notable decisions from Delaware courts

In the first half of 2021, Delaware courts issued several decisions affecting M&A dealmaking

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Six trends to look out for in the second half of 2021

After a turbulent 18 months which saw M&A crash before an impressive return to form, H2 2021 is set for continued strong deal activity, as well as new challenges

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Healthcare displays strong deal activity post-pandemic

The value of healthcare M&A in H1 surpassed pre-pandemic levels

Insight
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3 min read

US $174 billion

The value of 435 deals targeting the US healthcare sector in H1 2021

Healthcare M&A (including pharma, biotech and medical) saw strong growth over the first half of  2021 as investors continued to pursue deal opportunities in a sector that has played a crucial role in managing the pandemic.

Total healthcare deal value reached US$174 billion in the first half of the year, a 319 percent increase on H1 2020 and above pre-pandemic levels (H1 2018 saw US$71.3 billion in deal value; H1 2017 saw US$98.3 billion). The substantial rise in deal value comes alongside an increase in deal volumes, which increased 24 percent on H1 2020 levels to come in at 435 transactions.

Essential healthcare products and services have been in high demand through the COVID-19 dislocation period, with healthcare groups able to continue offering good visibility on future earnings as a result. The sector has also enjoyed steady growth in areas such as tech-enabled healthcare.

The strength of healthcare stocks has given corporates the confidence to push forward with M&A activity. Healthcare groups have recognized the value of scale after COVID-19 demand stretched capacity.

319%

Percentage increase in deal value in H1 2021 compared to the same period in 2020

 

PE and SPACs show appetite

SPACs and private equity firms have also been active in the healthcare space, attracted to the sector’s resilient earnings and long-term growth trajectory.

In a clear sign of the strong position of the private equity sector in 2021, healthcare saw the largest US buyout deal since the financial crisis in H1—the US$34 billion takeover of Medline by a group of PE investors.

The deal will see the consortium—Carlyle, Blackstone, Hellman & Friedman and GIC, the Singapore sovereign wealth fund—take over the largest privately held medical supplies manufacturer in the US.

Nor are PE funds the only ones willing to back big deals—strong public market performance has encouraged SPAC activity in the industry. Soaring Eagle Acquisition Corp., a SPAC headed by former MGM CEO Harry Sloan, acquired Boston-based biotechnology group Ginkgo Bioworks in a US$15 billion deal, in the third-biggest deal of the year in the sector. Ginkgo was founded by a team of scientists from MIT and produces DNA and microbes that customers can order and use in the development of their products.

Other notable SPAC deals include direct-to-consumer genomics firm 23andMe’s US$3.6 billion merger with VG Acquisition Corp. and Fortress Value Acquisition Corp. II’s US$2.4 billion merger with physical therapy clinic chain ATI Holdings.

 

Interest in research organizations rise

In the pharmaceuticals and biotech sub-sector, M&A has been an important tool for pharmaceutical companies to replenish their pipelines as blockbuster drugs go off patent, while the contract research organization (CRO) space has seen a wave of consolidation as providers of outsourced research services to the pharmaceuticals industry seek to build scale.

The second and fourth largest transactions of the sector were emblematic of this trend. Thermo Fisher, a producer of laboratory equipment as well as COVID-19 diagnostic test kits, acquired CRO PPD for US$21 billion, while Irish CRO ICON bought US counterpart PRA Health Services for US$12.1 billion.

Top healthcare deals H1 2021

  1. The Carlyle Group, Hellman & Friedman, Blackstone Group, and GIC Private Limited acquired Medline Industries for US$34 billion
  2. Thermo Fisher acquired PPD for US$21 billion
  3. Ginkgo Bioworks merged with Soaring Eagle Acquisition Corp, a SPAC, for US$15 billion

 

 

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© 2021 White & Case LLP

 

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