New norms brought about by COVID-19 resulted in a significant spike in M&A transactions according to new research out of global accounting firm PwC.

PwC claims that M&A transaction values rose 94 per cent in the second half of 2020 compared to the first half of the year. Deal values also jumped to a lesser degree by 18 per cent.

Both of these figures were also up compared to the last six months of 2019.

The higher deal values is mainly due to an increase in deals above $5 billion. In the first half of 2020 only 27 were announced but 56 were announced in the second half of the year.

The Americas saw the biggest growth in deal values of over 200 per cent.

While the report did not single out Australia, the experience has been similar Down Under with over $51 billion in capital raised by ASX companies in 2020 – the highest total in five years.


Why did M&A transactions skyrocket in 2020?

The increase in M&A transactions in 2020 was put down to businesses seeking to adapt to the “new normal” as well as the appetite for investors for quality assets.

“COVID-19 gave companies a rare glimpse into their future, and many did not like what they saw,” said PwC’s Global Deals Industries Leader Brian Levy.

“An acceleration of digitalisation and transformation of their businesses instantly became a top priority, with M&A the fastest way to make that happen – creating a highly competitive landscape for the right deals.”

Malcolm Lloyd who is also a partner in PwC’s Global Deals division., says with so much capital out there, “good businesses are commanding high multiples and achieving them.”

“If this continues – and I believe it will – then the need to double down on value creation is now more relevant than ever for successful M&A.”


SPACs becoming popular

PwC also found that special-purpose acquisition companies (SPACs) saw a breakout year with investors.

SPACs are shell companies that IPO without operations but hope to pick them up after listing through an M&A transaction.

In 2020 they raised approximately $70 billion in capital and accounted for more than half of all US IPOs.

PwC also said it expects more SPAC activity in 2021 particularly in electric vehicle charging infrastructure, power storage and healthcare technology.