This Year's M&A Deal Volume Hits 14-Year High... Expected to Surpass $5 Trillion

[Asia Economy Reporter Yujin Cho] Despite the economic downturn caused by the COVID-19 pandemic, the global mergers and acquisitions (M&A) market size soared to its highest level in 14 years this year. Continuous monetary easing and funds with no clear destination due to COVID-19 have flooded into the M&A market, and the total M&A transaction volume this year is expected to exceed $5 trillion (approximately 5,826 trillion KRW).

On the 25th (local time), Bloomberg reported that the global M&A transaction volume has surpassed $4.1 trillion this year, enjoying a boom. This breaks the previous record set in 2007, marking the highest in 14 years. Bloomberg forecasts that this trend will continue until the end of the year, with the total global M&A transaction volume easily exceeding $5 trillion in 2021.

Large-scale M&As aimed at 'expanding size' have been occurring one after another this year. In May, AT&T, a U.S. telecommunications company owning WarnerMedia, acquired Discovery, a cable TV channel operator, for $43 billion, and Canadian Pacific acquired U.S. railroad company Kansas City Southern for $27 billion, representing notable examples.

As M&As to realize economies of scale and scope have become active, the market landscape has been reshaped across various industries such as media and railroads.

Bloomberg evaluated that the expansion of such M&A transactions amid the economic downturn caused by the COVID-19 pandemic is unusual. The pandemic is still raging, and the unfriendly atmosphere created by the sharp regulatory scrutiny from U.S. and European government agencies aiming to curb the monopolistic positions of big tech companies is also acting as a negative factor for companies' merger and acquisition attempts.

Elizabeth Crane, Chief Operating Officer (COO) of global investment bank Moelis, said, "The fundamental factors that have driven the M&A market over the past year continue," adding, "There is no sign of any slowdown in M&A momentum in any form."

One of the factors driving the global M&A market boom is the unprecedented stimulus and liquidity following the COVID-19 crisis. Bloomberg assessed that funds with no clear destination flowed into the stock market, and the optimism of individual investors who led the stock market boom influenced not only corporate executives but also shareholders.

Above all, the SPAC listing craze has greatly contributed to forming the M&A boom. Due to increased volatility caused by the COVID-19 impact last year and this year, the number of companies seeking rapid fundraising increased, continuing the SPAC listing craze.

Recently, the SPAC Digital World Acquisition (DWAC), known for its merger news with former U.S. President Donald Trump's social media, saw its stock price surge tenfold in just two days due to a flood of individual buyers. The DWAC stock price, which closed at $9.96 on the 20th before the merger announcement, closed at $94.20 on the 22nd, nearly ten times higher.

In fact, M&A companies are receiving market attention and are being valued highly. According to British consulting firm Willis Towers Watson, companies that acquired other companies this year showed stock performance more than 2 percentage points higher than the market average.