M&A Landscape Europe: 2021 half year review

As we expected, Economic and M&A activity rates have picked up so far this year. However, the northern hemisphere is approaching its notorious summer doldrums, with signs of a vaccine slowdown and stretched equity valuations, light wind zephyrs could quickly become summer squalls.

Data from the Institute of Mergers, Acquisitions and Alliances (IMAA) shows the value of global transactions to early May of $1.5trn – this amount is almost 55% of the whole value of 2020, despite accounting for effectively only 4 months of this year.

The proximate cause seems to have been, as we suggested, the success so far of the vaccine rollout programmes - at least for (mainly) northern hemisphere developed economies.

Latest GDP forecasts from the IMF and OECD still point to a strong bias towards faster future growth in Asian and emerging economies, with slower growth in the UK and Europe.

For M&A, the principal risks for the remainder of the year seem to be two-fold. A slowdown in vaccine roll-out could see unwelcome tighter border controls, third waves and/or more rolling lockdowns. High valuations in equity markets have seen the cyclically-adjusted PE metric that seeks to account for the business cycle and inflation, rising to levels only seen once before in recorded history: the S&P 500 – in late 1999.

At the moment, these risk factors are just clouds on the horizon. For the 2021 outturn, much hangs on resuming the pace and extending the geographic reach of the vaccine programme so that the corporate sector can make progress towards delivering the profit growth so richly anticipated already in valuations.