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US infrastructure M&A has surged through the first half of 2021, with deal value climbing to US$126 billion in H1 2021—a fivefold increase on total deal value for H1 2020, according to data from Inframation. Deal volume has also increased year-on-year, with 191 deals recorded compared to 162 transactions over the first half of 2020.
Through much of 2020, infrastructure investors navigated the constraints around site visits and due diligence. However, as COVID-19 restrictions have been lifted and dealmakers have adapted to remote due diligence, a wave of pent-up deal demand has come to market, driving up investment.
Infrastructure dealmaking has also been driven by the growth in dry powder available to infrastructure funds, which has climbed 235 percent over the last decade according to Bain & Co, as well as ambitious plans led by President Joe Biden to accelerate infrastructure investment. The administration is pushing for legislation that would deploy up to US$1 trillion in infrastructure projects.
Infrastructure investors have started to cast a wider net as vaccines are rolled out and economies are reopening.
The have and have-nots
Interest remains high in resilient infrastructure verticals, such as data centers and telecoms, which have enjoyed surging demand as a result of home learning and home working. According to Comscore, US data usage increased 18 percent in 2020 compared to 2019.
But firms are also starting to see value in areas that were more negatively impacted by the pandemic and they are making investments in anticipation of a rebound in these sectors.
For example, dealmakers have also returned to the oil & gas sector as oil prices recovered. Energy Transfer acquired Enable Midstream Partners from CenterPoint Energy and OGE Energy Corp, and DoublePoint Energy sold leasehold interests and related assets in Midland Basin to Pioneer Natural Resources.
Similarly, KKR's acquisition of fixed base operator (FBO) Atlantic Aviation from Macquarie Infrastructure Corporation is a bet on the return of air travel, one of the hardest hit industries by the pandemic. The announcement of the US$4.5 billion transaction came months after the world's largest FBO network, Signature Aviation, was sold to a consortium comprised of Blackstone, Cascade and GIC. FBOs provide ground support for the aviation industry, including services such as maintenance, refueling and cargo handling.
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