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Alternative Market Briefing

M&A remains robust despite the pandemic

Monday, May 03, 2021

Bailey McCann, Opalesque New York:

New research from quantitative investment firm Versor Investments suggests that merger and acquisition activity continued in 2020 despite the pandemic and investors are likely to see more transaction volume this year.

The new paper, which looks at merger arbitrage trends over the past 18 years, provides perspective on the attractiveness of the current merger market environment.

According to the findings, M&A activity came back in the second half of 2020, with 110 deals announced. The dollar value of second-half activity, at more than $500 billion, was higher than in the second half of 2017, 2018, and 2019-all strong periods for merger activity.

Much of the activity in M&A is driven by the record levels of dry powder in private equity funds. That money - $1.5 trillion - is waiting for sponsors to identify targets. GPs, corporates and strategics stayed on the sidelines in the first half of last year. By the second half, buyers were back in the market looking for bargains. Further activity is likely exacerbated by GPs nearing the end of investment periods for commingled funds. The paper notes that corporates also accumulated cash in 2020, which may make them more likely to be acquisitive over the near term now that they have cash on hand.

Deal failure rates have also settled down. Versor notes that just after the financial crisis, the number of failed mergers increased for a time. That did not happen around the pandemic and......................

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