KPMG said that as companies continue to accept cheap financing and the pandemic recovers, by the end of this year, global transaction activity may reach a record US$6 trillion.
According to data from Refinitiv, so far this year, global M&A transactions have exceeded US$4.3 trillion, close to the record high of US$4.8 trillion set in 2015.
This marks a surge in the total amount of US$3.6 trillion from 2020. As the “repressed energy” of fundraising before the pandemic is still in full swing, Stephen Bates, KPMG partner and head of Singapore trading, said he did not see any signs of slowing down.
Bates said on CNBC’s “Street Signs Asia” program on Friday: “The current M&A market is definitely turbocharged.”
“There is a lot of suppressed energy in fundraising [in 2018 and 2019] This did not happen last year. This dry powder is now being deployed,” he said.
Corporate, private equity and SPAC lead the way
Technology, financial services, industrial and energy sectors accounted for most of this year’s transactions, mainly led by companies, private equity and SPAC or special purpose acquisition companies.
The soaring popularity of SPACs has no commercial operations. It was established only to raise funds from investors to acquire one or more operating businesses. They raised funds through an initial public offering and used cash to merge with a private company and go public.
Bates said the United States still accounts for the majority of transactions, although Europe has the fastest growth, with a year-on-year increase of 50%. At the same time, Asia grew by 20% year-on-year.
The surge in transactions came under the background of low interest rates and stagnant growth during the coronavirus pandemic, which led companies to look for other sources of growth. In fact, according to a KPMG survey in September, eight in ten (86%) CEOs said that inorganic methods will be their main source of growth in the next three years. The report pointed out that examples of inorganic growth include mergers and acquisitions, joint ventures and strategic alliances.
“We are in a fairly low-growth environment, which means that CEOs are looking for other markets to develop products, markets, and capabilities,” Bates said.
Bates said that this trend will continue until the end of the year, when transactions may reach the “nearly 6 trillion dollar mark” and may even continue until early 2022.
“Since interest rates remain low, positive sentiment is still there… I think this momentum [will] continue. I think we will see this in the first quarter of next year,” Bates said.