IMAP partners around the world closed 185 M&A deals worth more than $18 billion during the Q1-Q3 2021 period. The boom in market activity observed in the first half of the year continued in Q3 and indicators suggest that 2021 will close out as one the strongest years for IMAP on record.
The strong deal making environment is being sustained by a combination of high buyer demand following the pandemic lockdown pause, cheap financing, abundant private equity capital, and cash-rich companies pursuing growth opportunities, and business model changes amid widespread transformative market disruptions.
IMAP deals were closed across 15 different sectors in Q3, with Technology, Healthcare, Industrials, and Consumer & Retail the most represented. Of the 185 IMAP deals closed in Q3, 28% were cross-border.
Jurgis V. Oniunas, IMAP Chairman commented:
“In Q3, we saw global M&A hit unprecedented highs. As economic recovery continues and with debt and equity readily available, the dealmaking environment is increasingly robust and not surprisingly, market sentiment is positive. Cash-flush investors are in a hurry to close deals before the threat of tax and interest rate rises and competition is high, markedly affecting variations and multiples. Many of our IMAP partners are experiencing a record year and with a strong pipeline in place, we anticipate this momentum will carry on into Q1 2022 and to see many more landmark deals closed.”
IMAP Partner Local M&A Insights
“M&A activity has moved at a torrid pace in 2021”
Sarah Doherty, Capstone Partners – IMAP USA
North American Middle Market M&A activity has moved at a torrid pace in 2021, propelled by pent-up buyer demand, cheap debt, abundant private equity capital, and cash-rich corporations seeking growth opportunities and business model changes due to the transformative disruption of COVID-19. Looming tax increases under the Biden Administration have also expedited exit timelines and led to a surge in sellers hoping to complete an exit before year end to lock in the current tax code.
M&A volume climbed 31% YOY in 1H 2021 (7,662 deals), with the market fully correcting itself after the 22% YOY drop in 1H 2020. Low interest rates and aggressive buyer competition have driven purchase multiples up and average deal value reached a historic high of $66.5 million in Q2. We expect robust yearend activity, as dealmakers work at a fevered pace to close in 2021, with many deals spilling over into a bustling Q1 2022.
“In a seller friendly, aggressive market, valuations are robust as capital competes for deals”
Andrew Kemper, Capital West Parters – IMAP Canada
Mid-market M&A transaction volumes in Canada remain very high. We would categorize the market as an aggressive, seller friendly market with an abundance of capital competing for deals and driving very robust valuations. We currently have a record number of live sell-side mandates, many of which were the result of an in-bound, unsolicited proposal from an interested buyer. The Technology, Infrastructure and Healthcare sectors continue to lead the way from an industry standpoint.
“We expect that 2021 will end up being one of the best years in recent history”
Marcio Fiuza, Brasilpar – IMAP Brazil
The M&A market in Brazil continues to be extremely positive as the economic recovery consolidates after reaching a high percentage of vaccination against COVID-19 of the overall population. With several negotiations and closings scheduled for the fourth quarter we expect that 2021 will end up being one of the best years in recent history.
“Customers in the Industrial sector continue to face the challenge of sharply rising material and freight costs, especially in the Automotive sector”
Henning Graw, IMAP Germany
Our positive expectations for 2021 have clearly been met so far. By the end of August 2021 we had already signed 18 deals – as many as in the whole of 2020. We continue to see a positive trend in almost all sectors, but particularly in the Technology and Industry sectors, where we were able to complete 6 sell-sides each. In the Industrial sector, our customers continue to face the challenge of sharply rising material and freight costs, especially in the Automotive sector, where we are seeing increased equity measures due to restrictive banks.
For the remainder of the year, we continue to expect strong development overall: after the pandemic, the focus is clearly on growth, which will also be achieved through M&A, including transactions coming from the USA. To secure and expand our capacities, ongoing recruiting is one of our most important management tasks in the war for talent.
“The deal making environment is very robust and both M&A and IPO pipelines remain strong“
Piotr Chudzik, Trigon Investment Banking – IMAP Poland
We have continued to see a very robust environment for deal making in Poland in Q3 and Q4 2021, in both M&A and IPO/ Equity Capital Markets. The M&A and IPO pipelines remain strong, and we are preparing a number of landmark transactions due to come to market in Q4 2021.
M&A clients continue to take advantage of the high exit multiple environment. However, buy-side is becoming more cautious due to an expected increase in inflation levels potentially resulting in a rise in interest rates.
“The M&A market involving Japanese companies is expected to hit a record high in 2021“
Tomoyuki Izumi, Pinnacle Inc. – IMAP Japan
The M&A market involving Japanese companies is expected to hit a record high in 2021 as they invest in growth areas in the hope of overcoming the competition in a post-coronavirus world. The number of M&A deals in the first half of CY2021 was up 16% from the same period last year and is expected to lift the annual number above the previous record in 2019.
New leadership of Japan’s ruling party succeeding Prime Minister Suga will set policy direction even more towards structural reforms on multiple fronts to promote innovation, digital transformation, and carbon neutral efforts. Those economic and governmental policies will be key drivers for M&A across all industries in Japan.
“M&A activity in Q3 was primarily driven by heightened prices in the Commodities sector”
Ashutosh Mahesvhari, IMAP India
Deal activity in India continues to grow. This is being driven by several factors, including the state of the equity capital markets, low interest rates and the considerable surge in profitability of the large corporates.
We see the Technology sector continuing to draw a large pool of growth capital which is pushing inorganic growth, thus accelerating the path to public listing. At the same time, the Commodities sector has benefitted from heightened prices which has been the primary driver of M&A activity during the last quarter.
“Barriers are being lifted progressively and business travel is slowly resuming“
Mehdi Berbich, Ascent Capital Partners – IMAP Morocco
We are witnessing improving market sentiment in Morocco. Sanitary barriers are being lifted progressively, and business travel is slowly resuming, allowing local M&A firms to source international investors overseas and foreign investors to perform site visits and due diligence. In terms of deal closings, we are expecting H2 2021 to be as slow as the first half of the year, given all the interruptions and delays caused by the COVID pandemic.
We are winning (and expect to win additional) mandates from clients who are exiting from “pressing” problems relating to their treasury and cash flow, and are getting back to refocusing on strategy, investments, and M&A opportunities. This should allow us to realize meaningful business development gains moving forward, especially from family offices looking to divest their businesses (having weathered the crisis) and from Corporates looking to raise growth capital.