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M&A driving post-pandemic economic recovery, report says
A new report has revealed a massive soar in the value of M&A deals across the Asia-Pacific region and investigated what’s next for special purpose acquisition companies.
Lauren Croft
International law firm Allen & Overy has released its H1 2021 M&A Insights report, which has chartered the continued recovery in transactions across regions and sectors and revealed that deal values increased by 131 per cent in the last half of 2020.
According to the report, industries that proved to be highly resilient during the pandemic are witnessing phenomenal growth in M&A activity. Telecoms, media and technology (TMT) and healthcare saw huge increases in total deal values. By contrast, sectors hardest hit by the crisis are growing at a slower pace. Real estate, retail and financial services industries all saw a growth in deal value and volume but have not recovered as fast as other sectors.
David Broadley, co-head of global corporate at A&O said that global M&A deals were leading post-pandemic recovery.
“While transactions data for the first half of 2021 showed an extraordinarily strong year-on-year growth in deal values, they do compare with what became the quietest period for transactions in a decade as COVID-19 took hold in the spring of 2020,” he said.
“However, the figures still clearly indicate that the post pandemic recovery in global M&A deals, which began in the second half of 2020, is continuing apace.”
The US market saw the strongest recovery, accounting for 47 per cent of deal values globally, with values growing by 249 per cent and the volume of deals increasing by 29 per cent. Eastern Europe, however, was at the lowest end of the scale, with deal values declining by 48 per cent despite transaction volume rising by 11 per cent.
Special purpose acquisition companies (SPACs) experienced a global boom before a steep decline in Q2. Three hundred ten US SPACs were formed in Q1 compared to just 76 in Q2. The report explores the main reasons behind the decline, which include – a general cooling of the equity markets, coupled with a concern that many typical SPAC targets may be vulnerable to rising interest rates.
Sugianto Osman, partner at Ginting & Reksodiputro in association with Allen & Overy, focuses mainly on the APAC region – and said there were also signs of growing SPAC activity within Asia Pacific.
“There are increasing signs of SPAC activity in the Asia Pacific region, with most of the recent activity focused on de-SPAC transactions,” he said.
“The growth of the telco infrastructure and accessibility to personal tech is driving the growth in start-ups in Indonesia. The health tech sector is another area where we are seeing accelerated growth as a result of the pandemic.”
The Allen & Overy report also focuses on how the interests of both SPACs and high-growth tech companies have seen their interests align during the first half of 2021. Allen & Overy partner Yin Mei Lock said that an increasing number of SPACs are targeting the Asia market.
“We have seen an increasing number of SPACs formed to target Asia, and regulators in Singapore, Hong Kong and Jakarta have mooted the possibility of creating SPAC regimes for domestic companies,” she said.
“Asia is a prime destination for SPACs given the slew of possible de-SPAC targets that operate in the region, which benefit from Asia’s growth trajectory.”
The report also highlighted the momentum gathering behind using hydrogen as an energy source, as technological advances drive a change in its acceptance, prompting hydrogen-related M&A activity globally. In Australia the Murray Valley blended hydrogen joint venture between Engie and the Australian Gas Infrastructure Group is one of several projects to win a multimillion package of government funding for qualifying “green” hydrogen developments.
Perth-based corporate partner Goran Galic said that the hydrogen-related M&A activity the firm has seen so far is “focused largely on joint ventures and collaboration arrangements which tend to be either around project joint-development, technology development or investment.”
“The market is now seeing the start of some significant investments in ‘green’ hydrogen developments in focal markets such as Australia and the Middle East especially, whose governments’ strategies look to transition from being leading exporters of LNG to leading exporters of hydrogen,” he said.
“We are also seeing a focus on investments in, or buy-outs of, smaller players that control the IP rights to new and emerging hydrogen technologies.”
Lauren Croft
Lauren is a journalist at Lawyers Weekly and graduated with a Bachelor of Journalism from Macleay College. Prior to joining Lawyers Weekly, she worked as a trade journalist for media and travel industry publications and Travel Weekly. Originally born in England, Lauren enjoys trying new bars and restaurants, attending music festivals and travelling. She is also a keen snowboarder and pre-pandemic, spent a season living in a French ski resort.
