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Cross-border M&A takes off in Q3

Lucille Jones
Lucille Jones
Deals Intelligence Analyst

A huge H1 bottleneck of queued cross-border M&A deals shifted into Q3 and has resulted in the largest ever quarter becoming the largest ever year-to-date at $1.6trn. The Anglosphere saw the biggest surge, with private equity buyers, growing boardroom confidence and concerns around supply-chain security driving activity.

  1. A busy summer turned slow start  into record year-to-date as cross-border M&A increased by 93 percent.
  2. The U.S. is the most active investor and biggest inbound destination. It has taken a 38 percent share of all cross-border deals so far in 2021.
  3. The UK sees 250 percent surge in interest from foreign buyers to take second place, after a recovery from the economic shock of COVID-19 and lessened uncertainty over Brexit.

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Cross-border M&A has surged 98 percent to the end of September to reach $1.6trn, the highest total since records began in 1980. The performance is all the more remarkable given the slow first six months of the year, which were the quietest for cross-border deals since 2013.

The lion’s share of activity took place over the northern hemisphere’s summer months, making Q3 2021 the biggest quarter ever.

Cross-border M&A concentrated in Anglosphere

Cross-border deals have accounted for 36 percent of global M&A so far this year, with U.S. acquirers the most acquisitive, taking a 37 percent market share.

The Anglosphere drove the market for outbound acquisitions – with the U.S., Australia, Canada, and the UK taking the top four positions on the leaderboard.

The U.S. was also the most popular destination for deals, with a total value of $356bn, accounting for 22 percent of global cross-border activity. Transactions included General Electric’s $31bn sale of its aircraft-leasing unit to Irish AerCap, and Canadian Pacific Railway’s $32bn offer for Kansas City Southern.

Meanwhile, the UK confounded the pessimism following its departure from the EU to become the second most popular destination globally for inbound M&A.

Acquisitions of UK businesses by foreign buyers increased more than 250 percent year-on-year, to an all-time high. Overseas buyers represented 83 percent of all UK M&A, their highest share for six years, attracted by a faster-than-expected rebound from COVID-19 and reduced Brexit uncertainty.

Deals included DraftKings’ $25bn offer for Entain Plc, the $13.6bn acquisition of supermarket chain WM Morrison by private equity firm CD&R and Parker-Hannifin’s $9.8bn offer for aerospace and defence engineer Meggitt Plc.

What is behind the deal-making surge?

The unprecedented surge in cross-border deal-making since July reflects a confluence of factors, most notably pent-up demand unleashed as confidence returns to boardrooms after pandemic-related economic restrictions and social lockdowns largely abated over the summer.

In addition, interest rates remain low, while some commentators begin to warn of inflationary pressures building.

Strategic considerations are also believed to have driven interest in foreign acquisitions, including concerns around the security of supply chains and the prospect of protectionist regulation. For instance, the UK’s National Security & Investment Act will come into force in January 2022.

In addition, there are structural drivers of activity, such as the large cash-piles sitting in private equity funds, which went largely untouched during 2020.

Meanwhile, the U.S. special-purpose acquisition companies (SPACs) phenomenon began to spread to overseas acquisitions. Deals included Altimeter Growth’s $31bn acquisition of Grab Holdings, Fintech Acquisition Corp’s $10bn acquisition of eToro Group.

SPACs account for 11 percent of global cross border activity this year, up from 1 percent in 2020.

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What's happening with Global M&A in 2021

A huge H1 bottleneck of queued cross-border M&A deals has resulted in the largest ever quarter becoming the largest ever year-to-date at $1.6trn.