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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

traffic congestion

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

deep tech

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

electronic engineering

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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turbine in water

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

Insight
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3 min read

US$16.9 billion

The value of 63 deals targeting the US power and renewables sector in H1 2021

Within six months of coming into office, President Joe Biden has already made important policy decisions to accelerate energy transition away from hydrocarbons. Biden has re-joined the Paris climate agreement and outlined a timetable for reaching zero emissions. The Biden administration wants to cut greenhouse gas emissions to at least 50 percent of 2005 levels by 2030 and create a carbon free power sector by 2035 en route to delivering net zero carbon emissions by 2050.

According to figures from the Energy Transitions Commission, a global coalition of leaders from across the energy industry, achieving net zero 2050 will require between US$1 trillion and US$2 trillion of investment per annum. M&A into renewables and green energy will be a key factor for delivering investment at this scale.

These long-term drivers already appear to be driving M&A growth in the power and renewables industry.

There were 63 deals in the power and renewables industry in the first half of this year, worth US$16.9 billion in total. This represents a 169 percent rise in deal value on H1 2020 and an increase in volume of 15 percent over the same period. Deal value for H1 2021 has also topped pre-pandemic levels and is 30 percent above total value recorded in H1 2019.

169%

Percentage increase in deal value compared to H1 2020

 

Foreign buyers see opportunities

Institutional investors and sovereign wealth funds have been at the forefront of the deal push in the renewables space. The US has lagged behind Europe and Asia-Pacific in renewables development and this has attracted investment from experienced investors from those regions.

The Qatar Investment Authority and Iberdrola made investments totaling US$4 billion in Avangrid, the US-based sustainable energy company controlled by majority owner Iberdrola, a Spanish-based utility group. The proceeds from the investment have been allocated to funding a proposed merger between Avangrid and US utility PNM Resources. The merger will support investment in offshore wind energy projects and other renewable energy projects.

Singaporean sovereign wealth fund GIC, meanwhile, paid US$2.1 billion for a 19.9 percent stake in Duke Energy Indiana, a subsidiary of Duke Energy. Duke plans to use the proceeds from the deal to fund a five-year plan to accelerate Duke's clean energy transition.

Clean energy technologies developed in the US have also proven attractive for international corporates. SK Group, the third largest industrial conglomerate in South Korea, for example, paid US$1.5 billion for a 10.2 percent stake in Plug Power, a US provider of hydrogen fuel cells used for transportation and mobility. The deal will see Plug Power work with SK Group to roll out hydrogen fueling systems across South Korea and other Asian markets.

Top power & renewables deals H1 2021

  1. Qatar Investment Authority and Iberdrola made investments in Avangrid, Iberdrola's majority-owned subsidiary, of US$4 billion
  2. GIC bought a 19.9 percent stake in Duke Energy Indiana for US$2.0 billion
  3. SK Holdings acquired a 10.2 percent stake in Plug Power for US$1.5 billion

 

 

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