Big, Bold, Strategic Moves: The 2021 M&A Outlook

2020 M&A Market Overview

• The first half of 2020 saw a significant decline in M&A activity following the pandemic onset.
• The second half (September 1 through year-end) recorded nearly $1.8 trillion in deal value, the most active M&A market in history.
• Second-half activity volume was effectively double that of the first half.
• Early 2021 activity is running at double the volume of the first half of the previous year (pre-pandemic levels).
• Market rebound was driven by "lights at the end of the tunnel" regarding vaccine prospects, prompting aggressive positioning across technology, consumer, and healthcare sectors.

Operational Shifts and Virtualization

• Goldman Sachs has announced over 100 transactions since Q2 2020, the majority completed fully virtually.
• Clients have identified benefits including more efficient management time, reduced travel, and more focused interactions.
• Innovations such as drone technology for site visits are being adopted and expected to continue.
• Virtualization is expected to persist guided by client preference, though face-to-face interaction remains critical for cross-border deals.
• Significant signs of life and increased activity are emerging in transatlantic cross-border markets previously reliant on in-person interaction.

2021 M&A Outlook and Drivers

• Strategic dialogue has increased significantly with both corporate and private capital clients.
• Confidence is high that the worst of the pandemic will end in the second half of 2021 with broader vaccine distribution.
• Financing markets are described as highly conducive to M&A with open capital markets; banks are not liquidity-constrained.
• Boards of directors and investors are actively encouraging clients to aggressively reposition and find growth opportunities.
• Attractive stock prices combined with available equity and debt financing are driving clients to prepare businesses for strong growth in the second half of 2021 and beyond.

Deal Characteristics and Risk Appetite

• There is a heightened willingness among clients to execute big, bold, and complex strategic moves.
• Deal risk appetite has increased, leading to a rise in unsolicited and fully hostile approaches.
• Private equity "dry powder" remains substantial, with diverse capital pools (core PE, long-term capital, infrastructure, family offices, sovereign wealth funds) available for large checks.
• Transaction structures are becoming more innovative to accommodate this boldness.

SPAC Market Dynamics

• SPACs remain a relevant alternative path for companies to go public, attracting former executives, bankers, and founders.
• Private equity firms are beginning to enter the SPAC arena.
• Despite the boom in SPACs, corporate M&A activity remains the central driver of the overall M&A market; SPACs are not currently driving companies to pursue M&A they otherwise would not.
• SPACs are viewed primarily as an alternative IPO vehicle rather than a fundamental shift in M&A dealmaking logic.

Large-Ticket and Cross-Border Expectations

• Transactions exceeding $10 billion are increasing rapidly, a trend continuing into 2021.
• Major transactions are inherently international in scope due to the global nature of most companies, regardless of the registered location of the merger.
• Regulatory views from foreign governments remain a critical factor even for domestic deals.
• Goldman Sachs expects a return to traditional cross-border activity (Company A in Country X merging with Company Y in Country Z) in 2021.
• Large-scale global repositioning is being treated as critical strategy by boards and shareholders for the 2021 fiscal year.