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

M&A Activity Trends in Late 2020 and Early 2021

• The period from September 1, 2020, through December 2020 recorded $1.8 trillion in deal volume, the most active M&A market in history.
• Full-year 2020 second-half activity was double the volume of the first half, which was historically down due to pandemic-related retrenchment.
• Year-to-date activity in early 2021 has doubled again compared to the pre-pandemic first half of 2020.
• Client sentiment has shifted aggressively from risk mitigation in Q1 2020 to strategic positioning and opportunity capture following vaccine announcements.
• Strategic dialogue with corporate and private capital clients has increased significantly in Q4 2020 and continues to ramp up in Q1 2021.

Operational Changes and Virtual Deal Execution

• Goldman Sachs has announced over 100 transactions since the worst phase of the pandemic in Q2 2020, with a significant majority completed fully virtually.
• Virtual execution has provided benefits including reduced travel, more efficient use of management time, and more focused interactions.
• Innovation in deal execution now includes the use of drone technology for site visits and continued reliance on virtual management meetings.
• While virtual methods will persist due to client preference and efficiency, face-to-face interaction remains critical for cross-border and transatlantic deals.

Key Drivers of Current Market Optimism

• Capital Availability: Capital markets remain open with no bank liquidity constraints, contrasting with the 2008–2009 financial crisis.
• Private Capital: Significant "dry powder" exists across diverse pools including private equity, sovereign wealth funds, and family offices, with large equity checks readily available.
• Strategic Mandates: Boards of directors and investors are actively encouraging aggressive corporate repositioning and growth strategies.
• Valuation and Financing: Attractive stock prices combined with conducive financing markets are prompting companies to position for strong growth expected in the second half of 2021.

Deal Structures and Risk Appetite

• Clients are displaying increased appetite for larger, bolder, and more complex transactions involving higher risk in financing and regulation.
• There is a noted uptick in unsolicited bids and hostile takeover situations, contrasting with the opportunistic nature of pre-pandemic deals.
• Private equity sponsors are demonstrating willingness to innovate in transaction structures to deploy large capital pools.

The Role of SPACs in the Ecosystem

• SPACs have emerged as a relevant alternative path for companies to go public, attracting former executives and bankers.
• Private equity firms are beginning to enter the SPAC arena, though their specific involvement structures remain to be fully defined.
• SPAC activity is viewed as a parallel vehicle for capital raising rather than a primary driver of broader M&A volume; corporate strategic M&A remains the central market driver.
• Companies viewing M&A as their strategic imperative continue to pursue it regardless of SPAC availability.

Outlook for 2021: Scale and Geography

• Goldman Sachs expects an increase in large-ticket transactions exceeding $10 billion throughout 2021.
• Cross-border M&A is projected to return to life as vaccine distribution widens and pandemic restrictions ease.
• Even domestic transactions are increasingly international in nature, requiring consideration of foreign government and regulatory views.
• Large clients are prioritizing global repositioning as a critical strategic component for 2021 growth.