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The “charged” M&A market might hit a report $ 6 trillion by year-end, says KPMG

Global deal-making activity could hit a record $ 6 trillion by the end of the year as companies continue to accept cheap finance and the pandemic recovery, KPMG said.

The global merger and acquisition volume has so far exceeded $ 4.3 trillion this year, according to Refinitiv data, and is approaching the all-time high of $ 4.8 trillion set in 2015.

It's a total of $ 3.6 trillion increase in 2020. With the "pent-up energy" from fundraising ahead of the pandemic still in full swing, Stephen Bates, KPMG partner and head of transactions for Singapore, said he don't see any signs of slowing down.

The M&A market is absolutely charged right now.

Stephen Bates

Partner and Head of Transactions (Singapore), KPMG

"The M&A market is absolutely charged right now," Bates told CNBC's "Street Signs Asia" on Friday.

"There's a lot of pent-up energy from fundraising (in 2018 and 2019) that didn't happen last year. This dry powder is now being used," he said.

Corporations, private equity and SPACs take responsibility

Most of the transactions this year are in the technology, financial services, industrial and energy sectors, which are primarily led by corporations, private equity and SPACs or specialty acquisition firms.

SPACs, which have gained popularity, have no commercial activities and are formed solely to raise capital from investors for the purpose of acquiring one or more operating companies. You raise capital in an IPO and use the money to merge with a private company and take it public.

The US still makes up the bulk of the deals, Bates said, although Europe saw the fastest growth at 50% year-over-year. Asia, on the other hand, grew by 20% compared to the previous year.

The spike in deals comes against a backdrop of low interest rates and stagnant growth amid the coronavirus pandemic, which has led companies to look for alternative sources of growth. According to a September survey by KPMG, eight in ten (86%) CEOs say inorganic funds will be their main source of growth over the next three years. Examples of inorganic growth include mergers and acquisitions, joint ventures and strategic alliances, the report said.

With this momentum still lingering, I think we will see this momentum in the first quarter of next year.

Stephen Bates

Partner and Head of Transactions (Singapore), KPMG

"We're in a relatively low-growth environment, and that means CEOs are looking to other markets to expand products, markets and capabilities," said Bates.

That trend is expected to continue through the end of the year, when stores could hit "nearly $ 6 trillion," and perhaps through early 2022, Bates said.

“If interest rates remain low, the positive sentiment is still there … I think that this dynamic will (will) continue.

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