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Commercial awareness series: covid-19 and M&A

Commercial awareness series: covid-19 and M&A

Riki Story


The phrase “despite the impact of covid-19” embodies the overarching theme for M&A deals in 2021 for large international law firms. There has been a complete turnaround where deals, and especially megadeals, are de facto doing better than during pre-covid time. Deals are at a 10 year high in the first quarter of 2021 in the US. 

The US merger market, the largest legal market, has recorded the highest of any total first quarter with the value doubling year-on-year from $563.2 billion in 2020 to $1.2 trillion in 2021. This stems from the string of 47 transactions worth more than $5 billion (£3.5 billion), demonstrating the increase in appetite for deals. For example, the largest deal was between the world’s two largest aircraft leasing companies, AerCap acquiring GE Capital Aviation Services for $31 billion. 

The three most notable sectors are:

  • technology, media and telecoms (TMT);
  • energy, mining and utilities (EMU); and
  • Special Purpose Acquisition Company (SPAC). 


In quarter 1, the TMT sector produced 1,237 deals worth more than $344.8 billion recording the most deals, in tandem with the highest value by sector in the global scale. Among these, standout deals included Telefonica's Telxius sale to American Tower Corp for $9.4 billion, as it will allow American Tower to expand into the European Market. The telecoms sector is hot as the European market has shown a corresponding trend in growth such as Cellnex (Spanish telecoms company) acquiring KKR and Altice (French telecoms company) for $6.3 billion. 

This expanding growth in the telecoms sector can be explained by the level of distress in the leveraged loan market decreasing, following a spike in 2020, enabling the financial buyers to use such opportunities of low risk and uncertainty to acquire TMT-related targets, positioning them to contest record deals made in 2020. 


The EMU sector has also highlighted a striking year-on-year increase in deal values of $119.2 billion, more than tripling the 2020 quarter 1 record of $34.2 billion. Transactions such as the National Grid’s $19.8 billion takeover offer for Western Power Distribution, underscores the fundamental shift towards energy transitions. This increase in emphasis and the corresponding value can be explained by the increased focus on Environmental, Social and Governance (ESG) – evident from the numerous companies promoting their ESG slogans and the recent G7 summit pledging stringent methods to prohibit carbon emissions.  


Finally, the SPAC sector has also demonstrated its skyrocketing rise in the midst of a global pandemic. In 2020, 256 SPACS were listed, raising more than $83.3 billion, which is again a leap compared to when there were only 73 listings, raising $15.5 billion in 2019. The drive for the increase in SPAC deals can be traced back to the aforementioned transition towards clean energy under ESG efforts. This is seen with the large mergers between RMG Acquisition Corp and India's renewable energy company, ReNew Power for $7.2 billion. 

Further, SPAC CIIG Mergo Co (US listed) kindled interest and attraction to the electric vehicle manufacturer Arrival’s (UK listed) low-cost manufacture of electric cars, such as buses and vans through microfactories. ‘Game changer’ is how Arriva’s microfactories low carbon footprint is described, boosting low cost and rapid acceleration in mass electric vehicle adoption. Moreover, the rise of SPAC goes beyond the US and EU, as Israel has also shown growth. A key deal in 2021 was between the electric vehicle tech company REE Automotive and SPACE 10X Venture Capital Acquisition. White & Case LLP Partner Colin Diamond states: “It clearly demonstrates the appetite of Israeli companies to access the US market via SPAC transactions.” 

What is evident is that there will be a continued focus on ESG as a fundamental driver for economic change. The resources and capital required for the energy transition from coal and oil to renewable clean energy will in turn fuel companies to realign and create joint ventures, spurring tougher M&A deals, thereby increasing the quantity and value of corporate transactions. Thus, in the coming years, in tandem with the aforementioned growth in M&A deals, the incremental rollouts of vaccines and greater certainty in the economy, will contribute greatly to the increase in business confidence. Hence, the trend for increased M&A deal activity will continue accordingly and it is imperative for law students to pay further attention to future transactions.