Global mergers and acquisitions reach

Global mergers and acquisitions reach historic high in first half of 2021

Mergers and acquisitions (M&A) hit an all-time high globally in the first six months of 2021, with deals worth more than USD 2.6 trillion, up from USD 926 billion in the first half of 2020 and far exceeding the pre-pandemic five-year average (H1 2015-2019) of USD 1.6 trillion, according to recent analysis by EY.

By Aurel Constantin

The US and the UK are rising as the most attractive destinations for inbound M&A

More than half of the M&A activity in H1 2020 was recorded in North America, which saw deals worth USD 1.4 trillion (up from USD 345 billion in H1 2020) – almost double the average seen in the five years prior to the pandemic (USD 784 billion). North America was followed by the Asia-Pacific region, which saw M&A values of USD 446 billion, a jump from USD 222 billion in H1 2020 and an increase from an average of USD 317 billion in H1 2015-2019. Europe follows, recording USD 412 billion, up from USD 245 billion in H1 2020 and exceeding the H1 2015-2019 average of USD 356 billion.

Despite a decline in the total number of deals announced, a spike in billion-dollar deals has been the key driver behind activity so far this year according to the analysis, with 479 such deals announced. And despite many parts of the world economy still operating under restrictions, cross-border transactions have also staged an impressive comeback, increasing to USD 688 billion from USD 236 billion in H1 2020 and going well above the average of USD 480 billion recorded in the five years prior to the covid-19 pandemic.

OPTIMISM IN NORTH AMERICA AND EUROPE

Despite the strong headline figure, M&A is not evenly spread across the globe. When it comes to outbound and inbound transactions, North America and Europe are the main centres of activity.

The US tops the list of countries with the highest value of outbound transaction, having recorded USD 221 billion in deals, up from USD 77 billion in H1 2020 and more than double the H1 2015-19 average of USD 92 billion. With USD 58 billion (up from USD 14 billion in H1 2020), Canada comes in second, while the Netherlands and Ireland emerge as outbound M&A front-runners with USD 53 billion from an average of USD 21 billion between H1 2015-19 and USD 51 billion from an average of USD 4.3 billion, respectively.

At the same time, the US and the UK are rising as the most attractive destinations for inbound M&A. The US has recorded an increase of over 250 percent in the value of inbound transactions compared to H1 2020

(to USD 200 billion), and 60 percent compared with the H1 average (USD 125 billion) of the five pre-pandemic years. And the UK has seen an increase of 51 percent (to USD 87 billion) compared to H1 2020 – exceeding the inbound average between H1 2015-2019 (USD 80 billion).

Meanwhile, domestic dealmaking in China is running at a record pace, with M&A value so far this year totalling USD 197 billion – eight times more than foreign-invested M&A deals and a 20 percent increase in the average value of domestic transactions of 2015-19 (USD 164 billion).

ESG-RELATED ACQUISITIONS DRIVE SECTOR ACTIVITY

While tech-related transactions are leading the way with an increase in value of more than 161 percent (to USD 783 billion) compared to the pre-pandemic average, the media and entertainment sector has seen some of the largest deals in 2021, as streaming giants are looking to attract and retain customers. The sector has already recorded an impressive USD 157 billion worth of deals (up from USD 16 billion in H1 2020) and more than double the average of the five pre-pandemic years (USD 71 billion).

In addition, M&A in the renewables sector has almost tripled compared with H1 2020 as CEOs look to use transactions to meet ambitious environmental targets. The value of these environmental, social, and governance (ESG) transactions jumped from USD 35.7 billion in H1 2020 to USD 96.5 billion in H1 2021.

M&A IN ROMANIA IN 2021

Deal activity rebounded strongly in H1 2021, with a total of 69 transactions, reflecting a 19 percent increase on H1 2020. Despite the higher volume of dealmaking, the estimated value of M&A only increased by 4 percent, to USD 1.1 billion, due to a 12 percent decline in the average size of deals below USD 100 million, to USD 13 million. The acquisition of NGY Propertiers Investment, the owner of Hermes Business Campus, by investment fund Adventum Quantum for USD 146 million was the largest transaction during the period. Hidroelectrica’s acquisition of the 108 MW Crucea Wind Farm, the first of this kind by a state-owned utility company in the private sector, reaffirms the accelerating pace of the green energy transition. Although the deal value was not formally disclosed, market pundits estimate the transaction at around USD 120-160 million.

While excluded from the value of M&A in EY’s data, three other large deals of the period are worth mentioning. In January, AmerisourceBergen Corporation agreed to acquire the Alliance Healthcare businesses of Walgreens Boots Alliance in nine countries, including Romania, for USD 6.47 billion. In May, food delivery app Glovo acquired the operations of Delivery Hero in the Bal-

kan region, including Romania, for USD 208 million.

Strategic investors continue to be the dominant players on the Romanian M&A market, accounting for 94 percent of transactions. Although Romania remained an attractive investment destination for foreigners, with 31 inbound deals accounting for 45 percent of all transactions, domestic deal-making (34 deals) increased by 31 percent compared to H1 2020 and accounted for just under half of all transactions. The most active inbound investors were the United States (6 deals) and Germany (3 deals), followed by Hungary, France, Italy and Ireland, with 2 deals each. The most active sectors by deal volume were technology (14 deals), followed by real estate (10), diversified industrial products (10), power and utilities (6), and healthcare (6). In terms of disclosed deal value, power and utilities attracted the largest share of investment, followed by real estate, banking & capital markets, diversified industrial products, and technology.

The Romanian M&A market is expected to remain active for the rest of 2021 given opportunities to further accelerate growth, including those arising from the economic volatility caused by the pandemic that has left some businesses financially distressed. M&A will also be driven by the need to adapt business models, particularly in e-commerce and direct-to-consumer, but also to address the digitalization, green economy, and ESG agendas. Liquidity of capital and favourable financing costs will support and accelerate these trends. M&A winners have been and will be those that have demonstrated resilience and innovation during the pandemic.

Despite this overall positive sentiment, it remains unknown how the pandemic will evolve in the second part of the year.

H1 2021 CAPITAL MARKETS IN ROMANIA

In Q2 2021, the capitalisation of Romanian companies listed on the Bucharest stock exchange (BVB) exceeded the pre-pandemic level and saw the largest IPO on the main segment for over three years. TTS, the largest Romanian carrier on the Danube, started trading on June 14th after the sale of 50 percent of company’s shares for USD 70.5 million.

Investment activity on the BVB continued to see an upward trend in Q2 2021. Market data indicates a preference for corporate bonds as a new investment instrument, with eight bond issuances during the period for a total of USD 357 million, the largest of which was BCR’s, at USD 244.7 million. The alternative segment, AeRO, was also very dynamic in Q2 2021. Six listings were concluded for a total of USD 15.9 million across a broad range of sectors, including: dairy (Agroserv Mariuta and Bonas Import Export), wine (Vifrana), manufacturing (Raiko Transilvania and Simtel Team), IT (Firebyte Game), and agriculture (Agroland Agribusiness).

Vastint Romania sticks to its plans even as pandemic lingers

Antoniu Panait, Managing Director at real estate developer Vastint, tells Business Review about the company’s plans on the office segment and how they will create even better conditions for people working in its buildings.

By Anda Sebesi

Has the pandemic period impacted your future development plans in Bucharest?

The global pandemic that started over a year ago has had an impact on the entire global economy and on every single industry, generating issues in terms of planning and executing any type of project. We have faced the same types of challenges as everyone else as a result of the restrictions. Things are nevertheless moving forward, albeit at slower pace than we had anticipated. We are confident that the situation will soon improve and that this whole period and its effects will be overcome.

Considering our long-term commitment regarding both ongoing and future projects, our plans in Bucharest remain on track, progressing at a normal pace, and our general technical specifications (healthy air conditioning, 100 percent fresh air supply, openable windows) are proving even more fitting now considering tenants’ needs and expectations.

What does your development pipeline look like for 2021 and 2022?

We aim to continue with all the projects in our pipeline, which are currently in different stages of development. All future decisions will depend on market conditions, demand levels, and the feasibility of each project. of both investments and demand. How does this inform Vastint Romania’s development plans in the housing segment?

Bucharest has always been a city where housing supply could not match the demand. This past year has only emphasised the need for larger and more comfortable spaces where residents can relax for longer periods of time, and not just for a few hours, because working from home has led to a number of changes in people's habits.

Even though some real estate developers have chosen to redirect their attention towards developing residential projects instead of offices, the more pragmatic ones have maintained their original plans, acknowledging the fact the office market has remained stable and that there will always be demand for offices despite the changes that may occur in some companies’ work habits.

Vastint Romania approach remains unchanged, with further/future developments progressing as planned.

We want to meet our future customers’ expectations, which have evolved significantly in recent years, so we are taking our time for detailed planning and design in order to come up with ways to make people’s lives better. How will you fund new developments in Bucharest?

Vastint has always been a very stable company in terms of the funds it chooses to invest in the enlargement of its portfolio. All these decisions are taken at group level before the implementation of each major project, taking into account the long-term implications of each option we have on the table.

Is the emerging hybrid work system changing your investment plans for the office sector?

As I mentioned before, the lack of predictability in how companies will decide to function in the future does not detract from the general importance of office spaces. Having in mind the limited amount of information that we currently have regarding the impact of this hybrid working model on the wellbeing of employees and how it will impact productivity in specific industries, it’s difficult to forecast future demand and this phenomenon’s future effects on the office market. Nevertheless, there will certainly always be a need for office spaces and we will continue to focus on maintaining a high technical standard and overall quality in our projects, because this shall always be important for any office user, and so will the location.